Facebook warned that its profitability would be hit by investments in securing it from abuse after it was home to Russian attempts to manipulate US politics, as it trounced earnings expectations in the third quarter.
Mark Zuckerberg, founder and chief executive, said the goal of “protecting our community is more important than maximising profits”. Facebook estimates costs will rise 45 to 60 per cent next year, hitting margins as revenue growth is due to slow.
“Our community continues to grow and our business is doing well,” said Mr Zuckerberg. “But none of that matters if our services are used in ways that don’t bring people closer together.”
Facebook put its efforts to combat Russian misinformation front and centre during its earnings call, a contrast to Twitter and Google who face similar problems. Twitter mentioned it in just one paragraph of prepared remarks and it was not discussed at all on the call of Alphabet, Google’s parent company.
Mr Zuckerberg said he was “dead serious” about tackling the problem. He said he was talking about it on the earnings call because he wanted investors to hear directly from him that investment in security was going to increase, on top of all Facebook’s other investment priorities from video content to artificial intelligence.
“What they [the Russian actors] did is wrong and we are not going to stand for it,” he said.
He added that long-time followers of Facebook know that they do something when they set their mind to it. When Facebook had identified a problem as a priority in the past — for example, its lack of mobile advertising after its initial public offering — it had concentrated the whole company on it.
The world’s largest social network beat expectations on earnings and revenue in the third quarter. Diluted earnings per share were $1.59, higher by 24 per cent than the average analyst estimate for the third quarter. Net income was $4.7bn, up 79 per cent year-on-year.
Total revenue was $10.3bn, higher than the consensus forecast for revenue of $9.8bn and up 47 per cent from the same period the year before. Mobile advertising was about 88 per cent of all advertising revenue and the average revenue per user in the US and Canada crossed $20 in a quarter for the first time.
Both monthly and daily active users rose 16 per cent year on year. At the end of the quarter in September, there were 1.37bn people logging on each day to Facebook, and 2.07bn logging on at least once a month.
Investors had previously shown little interest in the political troubles faced by Facebook, which alongside Google and Twitter, was quizzed by Congress twice this week on how a Russian disinformation campaign was able to use the platform to spread divisive political messages ahead of the US presidential election.
Its shares were up 5 per cent since September 5, the day before the company announced it had discovered advertisements bought by the Russia-linked Internet Research Agency. But following Facebook’s earnings call, the shares had fallen 1.9 per cent to $179.21 in after-hours trading.
Facebook intends to double the number of staff, both employees and contractors, working on safety and security to 20,000 in 2018. The company’s overall headcount already grew 47 per cent year-on-year in the quarter.
When asked by an analyst why Facebook could not use artificial intelligence to save on the cost of hiring, Mr Zuckerberg said he wanted people looking at the content when the “stakes are high”.
“We’re going to invest in both people and technology. Both are really important parts of the solution and go after different parts of these problems,” he said.
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