Facebook, the social media giant, reported 4Q16 revenue of $8.81 billion with Earnings per Share (EPS) of $1.31 beating market expectations of $8.51 billion with an EPS of $1.41. Moreover, its ad revenue from mobile contributed to 84% of the total revenue signaling its successful transition to the mobile platform.

Facebook reported a profit of $3.568 billion for its 4th quarter of 2016, a year-on-year (YoY) increase of 177%. Last quarter’s profit figure for Facebook was $2.379 billion. The YoY revenue for the 4the quarter witnessed a growth of 51% as against last quarter’s 56% and 59% in the second quarter of 2016.

The total revenue garnered by Facebook in 2016 was $27.6 billion. Although the revenue did slip in 4Q16 for the company, investors still were optimistic about its prospects as the share price reflected an overall increase of 0.94% on the day the results were announced. Moreover, the company did anticipate a lower revenue because its predicts were expected to exhaust their ad space by mid-2017.

The daily active users figure for the social media giant reached 1.23 billion in the 4th quarter, a YoY growth of 18%. However, despite these positive numbers, Facebook’s user growth in the US and in Canada is beginning to slow down. In these countries, it added only 2 million monthly and daily users in the last quarter of 2016 reaching 231 million monthly users and 180 million daily users.

Yet, the stickiness factor (which measures the percentage of monthly users who visit daily) remained unchanged for this last quarter at 66% which is a positive sign.

The huge ad revenue collected by Facebook is indicative of the success of its ad targeting and user engagement activities. The average revenue per user (ARPU) in Canada and the US was $19.81, a YoY increase of 44%. The global ARPU was a more modest $4.83, a YoY growth of 29.85%.

These high revenue figures speak of huge growth potential that Facebook has in terms of its ability to get increased revenue per user in the already established Western markets and its growing market in developing nations.

Mark Zuckerberg, the CEO of Facebook, when queried on the status of the company’s video content strategy, said that it is intending to start with the shorter format of video content.

He added that the company needs to construct a sustainable revenue sharing model so that professional creators in that segment can be compensated adequately. However, he did make a note of the video and audio sharing via Facebook messenger that is used by 400 million users every month.

The last quarter was fairly tumultuous for Facebook after being hit by allegations that fake news built on its platform helped Donald Trump win the US Presidential election.

Experts feel that the key to Facebook’s growth and sustenance in the market will be to leverage its expansion plans in the chat segment via Whatsapp and Messenger along with virtual reality through collaboration with Oculus.

Moreover, they feel that Facebook has a strong and robust core business strength that it can rely on to continue its dominance in social media.

February 20th, 2017

Posted In: P-Value News


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