Facebook ad revenues rise 27% while profits drop 16% due to fines and legal costs

Although advertising revenues rose 27% to over $70 billion during 2019, Facebook was not able to halt a decline of 16% in full-year profits to $18.4 billion.

The company cited rising expenses (up 51%) due to legal costs after the social network was hit with a US regulatory fine of $5 billion in July 2019 over privacy issues.

Stocks slid 6% after the results were announced.

The company noted that daily active users across all its platforms (Facebook, WhatsApp, Instagram and Messenger) had increased 11% during December 2019 to 2.26 billion.

CEO Mark Zuckerberg remained optimistic about fixing the network’s social and privacy issues in 2020. He added that sending payments via WhatsApp would be a major addition to the messaging app this year.

“I’m really excited about this, and I expect this to start rolling out in a number of countries and for us to make a lot of progress here in the next six months,” he said.

Debra Aho, a principal analyst at eMarketer said that results weren’t all too different from previous quarters.

“Despite all of the concerns that have been swirling around the company in the past two years, it beat expectations on revenue, and it demonstrated continued growth in its user base. This is a company that has shown that it can withstand ongoing criticism of its practices and yet still pull out gains in both revenue and users.”

“eMarketer expects this momentum to continue into 2020. Advertisers are expected to increase spending on Facebook (including Instagram) by 22 per cent this year. Separating Instagram out, we expect that property to increase its ad revenue by 54 per cent this year, as advertisers continue to flock to Instagram for feed advertising, story advertising and also the potential for ad placements in the Explore tab.”

Meanwhile, Aaron Goldman, CMO at 4C Insights, noted that clients remained enthusiastic about spending on Facebook.

“Our advertisers increased their spend on Facebook by 40 per cent in the 4th quarter of 2019 compared to 2018. The platform continued to deliver strong results thanks to the combination of audience scale, engaging content, and advertising precision.”

“Looking ahead we expect to see continued growth as the Stories format continues to get traction with both consumers and brands. We are also seeing strength across Facebook and Instagram with video ads as part of a cross-channel approach to managing reach and frequency. Additionally, the rollout of Instagram checkout is helping bring more commercial intent to the platform which will further drive positive business outcomes for marketers.”

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