After the rain, comes the rainbow. It has been a stormy and rainy season for the social media giant, Facebook, as today they announced a strong first quarter earnings. This is an incredibly good news as who would have thought that despite all the challenges they faced since the beginning of the year, following the Congressional testimony cantered on its chief executive, and what has shaped it up to be the largest crisis till date.
The Cambridge Analytica data privacy scandal came to light late in the first quarter, and therefore the substantial impact on Facebook’s business would be hard to see until the next quarter of the year. The tech giant was able to recover from the daily active user slump it suffered last year, when its US and Canada daily active users (DAU) number shrank to 184 million and marked the first time Facebook usage has ever decreased in the company’s primary market. The slump was primarily attributed to Facebook tinkering with the News Feed to favour more meaningful interactions, which CEO Mark Zuckerberg said back in November was a long-term plan to improve the product and prevent more widespread abuse from bad actors.
Facebook has weathered the daily active user slump it suffered last year. In the past quarter, facebook has added 49 million new daily active users for a total of 1.45 billion daily users and about a 3.5 percent increase compared to the previous quarter. The number of daily active users in the US and Canada also jumped back up to 185 million, following that historic downturn last quarter. The company posted revenue of $12 billion, which is a 50 percent jump compared to last year’s $8 billion. These metrics beat analyst expectations and Facebook’s stock is up by nearly seven percent in after-hours trading.
Zuckerberg opened up the earnings call by discussing the problems Facebook had weathered, including fake news and “app developers and data privacy. According to the CEO, the tech giant would do more to “make sure those tools are used for good”. Moving on, he added, “we have always built privacy into our ads, in tandem with the new European data privacy rules set to take effect on May 25th, as well as the new policies that has been launched, users would be better protected against privacy violations”.
In the first quarter of 2017, Facebook grew its daily active users by 18 percent, and in the first quarter of 2016, it grew that metric by 16 percent. Given that the hashtag #DeleteFacebook was trending for some time when the Cambridge Analytica scandal first started gaining steam, the number of users turned off by Facebook and its approach to privacy could have been a factor into why Facebook’s user growth shrank.
Overall, Facebook has shown strong growth despite its current embattled reputation. The second quarter of 2018 should shine more light on whether the Cambridge Analytica situation has had a measurable impact on the company’s bottom line or not.
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