Facebook crushes Q2 expectations despite rising scrutiny of its services and coronavirus concerns

Facebook crushes Q2 expectations despite rising scrutiny of its services and coronavirus concerns

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Facebook grew its revenue and user count despite the coronavirus pandemic, an ads boycott, an antitrust regulatory hearing, and rising scrutiny over hate speech and content moderation on its services.

“This was a strong quarter for us, especially compared to what we expected at the start,” said Mark Zuckerberg, Facebook’s CEO.

Facebook reported that during its second quarter it generated $18.69 billion, crushing analysts’ estimates of $17.4 billion. Second-quarter revenue was up 11% from the same quarter last year though much slower than the 26% it grew at that time. It also grew its daily active users across its family of apps to 2.47 billion, up 15% from the same quarter last year. Monthly active users across services were up 14% totaling 3.14 billion.

“We think that Instagram has played a major role in Facebook’s ability to withstand the effects of the pandemic,” Debra Aho Williamson, eMarketer principal analyst, said in a released statement. “Although Facebook doesn’t release details about Instagram’s revenue, we believe that Instagram has been a rapidly growing contributor to the company’s total revenue, and that its success is helping to buoy Facebook as a whole.”

Facebook attributed some of its user growth to shelter-in-place orders during the first few months of the pandemic. But the company expects user growth to be flat or slightly down in most regions in the third quarter as restrictions ease.

The company’s stock jumped about 7% in after-hours trading, priced at $250.19 per share, following the announcement.

Facebook’s earnings come one day after Zuckerberg joined the CEOs of Apple, Amazon, and Alphabet to testify before the House Judiciary antitrust subcommittee. All four companies reported earnings on Thursday, each beating analysts’ estimates. The news also comes as companies have slashed their digital advertising budgets during the coronavirus pandemic. (Facebook reported a slowdown in digital ads during the previous quarter, as well.) Alphabet and Microsoft similarly reported slowdowns in digital ad sales.

During the earnings call on Thursday, Zuckerberg spent some time defending Facebook following the previous day’s scrutiny of the congressional antitrust hearing. He touted the company’s services and their importance during the pandemic, suggesting connecting to loved ones and customers would be harder without Facebook. He also suggested Facebook is often misunderstood.

“There’s such a fundamental difference between how the vast majority of people actually experience our services, and the impression you’d get if you just read much of the commentary about Facebook,” he said on the call. “Some seem to wrongly assume that most of the content on our services is about politics, news, misinformation, or hate. Let me be clear: it’s not. “

Sheryl Sandberg, Facebook’s chief operating officer, also addressed the company’s work on hate speech and discrimination, citing the company’s Civil Rights audit and work to improve its content moderation. She said Facebook is working on the problem, “not because of pressure from advertisers, but because it’s the right thing to do.”

More than 1,100 advertisers participated in a one-month Facebook ads boycott over hate speech and discrimination—the effects of which won’t be reported until third-quarter earnings. Organizers of the boycott have said they plan to expand the call for a halt on Facebook ads to Europe and are continuing to communicate with many advertisers in the U.S., who have opted to extend the pause past July.

Analysts have previously said they don’t expect the boycott to have any major effect on the company’s earnings. Facebook said that within the first three weeks of July, ads grew about 10% year over year, in line with second-quarter growth, and that it expects third-quarter growth to be roughly similar to the July performance. Zuckerberg said people wrongly assume that Facebook is dependent on a small set of big advertisers, but the reality is small businesses represent the largest portion of advertiser dollars. While some small businesses did participate in the boycott, many couldn’t afford to take the financial hit that would come with halting ads.

Facebook also said headwinds for ad targeting and measurement to be increase due to regulations like the California Consumer Privacy Act and changes to mobile operating platforms, which the company said was “increasingly significant as the year progresses.”

Aho Williamson of eMarketer said calls the outlook “sobering” but “reflective of the uncertain state of the world’s economy.”

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