Facebook Q2 2018 Earnings | Hacker News Reader

Facebook Q2 2018 Earnings

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84 pointschampagnepapi67 comments

Market isn't happy. 25% drop in after hours trading.

It'll be interesting to see if it recovers tomorrow like Netflix did (which then of course gave most of it back the next day again).

Jesus, I thought you must have made a typo, but it actually did drop 25%. That's nuts for a company of that size.

It's after hours where there is little liquidity. The real test will be tomorrow.

Income at an all-time high, revenue doubled in the last two years, but shareholders are unhappy? Could somebody please explain this to me?

they expected more growth, and FB projected more costs.

A lot of the stock price was based on expected extreme continued growth. They just explicitly said that the growth is slowing and will slow down more, so they're basically losing all of the priced in growth.

The value perceived by shareholders is only partially related to the current revenues. It is about perceived future value. And shareholders are right to be spooked I think.

Revenues have grown 47% for only 11% in MAU. I don't hold shares in Facebook, but combined with the feedback I hear from friends and family about Facebook becoming increasingly ad-obsessed and devoid of valuable content, that would make me very nervous too.

Lets not forget that Facebook the company is not just Facebook the Website

They also own Instagram, Whatsapp, and a host of other massive online properties

While Facebook dies, Instagram (seems anyway) to be thriving

Now, a bad idea for Instagram would be to couple it tightly to Facebook, so that the demise of one drags down the other. Oh, wait...

It's NOT coupled tightly at all. You don't need an FB account.

Facebook is diversifying into non owned operated 3p apps through audience network.

11% may be the YoY growth in world-wide MAU, but MAU has actually dropped in Europe and remained constant in the US compared to last quarter.

Priced for growth, growth slowed.

Revenue missed expectations (even though it grew in absolute terms), and user growth has slowed down again, and that is making investors nervous.

When almost everyone is on Facebook, user growth just has to slow down -- basic math. User growth becomes meaningless as a metric and revenue per user is what matters then. What did investors expect? Indefinite linear or even exponential user growth?

It's obvious to anyone without a vested interest in Facebook growing forever.

However, much of capitalist society is built on the assumption that growth will never end. Things start falling apart when that assumption inevitably proves wrong.

It hasn't just slowed down. MAU/DAUs in Europe have dropped compared to last quarter, and stayed flat in the US.

Looking at their average revenue per user. Even with the break down into regions, US users (the most premium users according to the report) make $25/year. I would easily pay $100/year for tracking free, advertising free Facebook.

Even if only 5% of your friends were on it?

That's a leading question. It could (in theory) be possible to come up with a plan that tracks and advertises to free users while letting people pay to maintain some privacies.

This creates a two tiered society in the future. Kind of Dystopian feeling.

what? That's just a freemium model.

This is a joke, right?

Heh, I guess I should have been more elaborate. It was half sarcastic, half philosophical. I was just imagining a future where resources/money only matter to purchase privacy and most essential needs are taken care of. Instead of rich poor, what if the future is those with privacy and those with out, or some shade of that? Maybe it will always be science fiction, but we live in an increasingly monitored world and that power could easily be turned on citizen.

It’s a great model for the users. The fact that it hasn’t seen significant adoption makes me think that it’s not viable one, though. If you think about it, advertisers would put much lesser value on the free tier users, so the free tier will collapse.

You're looking at that wrong. That's $25 for just the quarter. They'll cross over $100 per user this year for the US & Canada. For Q4 it was $26.76 for that combined region, for example.

I don't think that's correct. They must report yearly revenue per user quarterly.

It is correct, they generated $26 per user in the US and Canada in Q417. There's 185m daily active users in the US and Canada, driving $20+ billion in sales for 2018.

The US + Canada market generates 3x the revenue per user versus the EU, and 10x the per user revenue of Asia Pacific.

Here's the Q4 reporting:

"But most of Facebook's money still comes from users in the U.S. and Canada, where that number is even higher: $26.76 per user."

https://www.cnbc.com/2018/01/31/facebook-earnings-q4-2017-ar...

And here's a break-out on the regionals for past Q4 reports:

https://www.statista.com/statistics/251328/facebooks-average...

That's almost 30 cents per day per user!

Me too. I'm not sure if I could trust FB not to track though. I'd always feel like they would collect anyways, "anonymize", and build a profile for users who opt into the paid service. For "internal" use of course. In fewer words, I simply don't trust FB, and I'm not sure if there's a good system to audit their data collection behaviours.

Law of averages... The distribution might be such that the kind of user willing and able to pay $100 a year for a social network is worth a lot more than $100 a year to advertisers.

No matter how you slice it, the ad supported model might just be a better flywheel than subrsciption based one.

You are looking at the average. What if the ones willing to pay $100/year are those worth more than $100/year.

Yep. Just having the $100 disposable income for a social media site means you have disposable income for other things that advertisers would love to pay to show you.

I see people say things like this a lot on HN ("I would easily pay X for Y, if it meant no advertising"), and I worry that we are a bit of a self selecting population with the means for such things.

Imagine you have family with 4 kids. Are you actually going to spend $600/year on facebook?

Also, I wonder if the people who _wouldn't_ pay for a subscription are just quieter? And finally, would you really want to be on facebook if it lost half of its user base because that half didn't want to pay?

It's the "I'd buy that on a t-shirt" problem. People who say it don't usually mean it, and the few who do aren't worth the trouble of making it available.

Why is it dropping by 25%? I’m buying after hours but it just wiped off 150B in market cap over decent earnings. Beat eps, similar growth, slight dip in Europe expected, no dip in Canada or US.

Adjusted guidance for future growth, they expect revenue growth to slow down significantly.

It still makes zero sense, it's pure emotion. Unless the speculation is for something far worse: a rapid plunge to negative growth (that doesn't appear likely right now).

Microsoft is growing at about 1/3 the rate of Facebook, and with the FB shares down 22% after hours (~$500b market cap), Microsoft has a real PE ratio at least 1/3 higher. The same crazy contrast exists for Google, Amazon, Netflix.

This is an emotional mis-pricing by the market, just as the drop to $150x in March was. I haven't bought after hours, but if the emotionalism continues tomorrow, it's an easy buy on further weakness.

> It still makes zero sense, it's pure emotion.

It's pure machines.

These are event trading algos (event means news in trading lingo).

Anyway, if you believe it's a huge misprice, just go ahead and buy this amazing opportunity.

> Monthly active users also didn’t grow compared to the first quarter and remained steady at 241 million in the U.S. and Canada

> Monthly active users shrank from the first quarter to 279 million from 282 million in Europe.

Is this the beginning of the end?

One can hope

That would be lovely.

Is monthly active users just for the Facebook website, or all sites they own? (like instagram etc) how do the other sites compare?

Big problem with network effects is they tend to unwind just as aggressively as they start.

WhatsApp is very popular amongst my social circles in Europe, but I don't really know anyone who actively "uses FB" (as in posting content, actively friend requesting new people etc). I am sure they are still counted in MAU stats but are increasingly "zombie users", somewhat hooked on the addictive properties and notification spam FB delivers rather than getting actual value, which is unsustainable in the long run.

Facebook hasn't been the best for a long time. It's easy to get lost behind rosy quarterly numbers and miss the forest for the trees. The platform has been on a decline and it's starting to show in its numbers.

There's a difference between decline and lack of growth. Facebook, at this point, has most of the internet connected population of the world signed up. That's a huge deal, and it means that even if Facebook MAU/DAU don't grow, they're in a good place to grow revenue, just by being the de facto gatekeeper for advertising going forward.

Facebook isn’t declining much. More so growth has just stalled. It’s still a huge company and Instagram will continue growing. If they can get Facebook Messenger and/or Whatsapp monetized to even a few bucks per user, that’ll add a decent chunk of change too.

Users declined in Europe which is their second highest revenue/user geography. Their future revenue targets were also revised lower (i.e. declined).

Yikes, in the few minutes that I first loaded this Marketwatch story about the stock falling, $FB went from -19% to -24% in after-hours trading. https://www.marketwatch.com/story/facebook-stock-crushed-aft...

It's amazing to me how volatile tech stocks are even today.

I remember buying Amazon and Netflix 5 years ago when each of them fell 33% on an earnings miss and it has worked out really well buying on "miss".

Even today??

They have years of profits and growth baked into their stock valuation.

What value does Facebook provide as a company? Do ads create value?

As a company they provide value to their customers, who are advertisers, by delivering them prequalified leads.

So they help people part with their money. Then, if I was an advertiser, I'd put my money elsewhere:

> For example, while Google users click on the first advertisement for search results an average of 8% of the time (80,000 clicks for every one million searches), Facebook's users click on advertisements an average of 0.04% of the time (400 clicks for every one million pages).

https://en.m.wikipedia.org/wiki/Facebook

So? Advertisers pay per click or even sale, so they don't care the least how many people "saw" their ad before that. Some agencies even sell this as a "branding" side effect.

senator, we sell ads

Is there any information indicating the areas where they are increasing headcount the most like Alphabet does? Does Apple release that information too?

Quite alarming, with the size of Facebook, the stock price could still suffer such a huge fluctuation...

It must be scaring the shit out of FB that their growth is stalled in the US & receding in Europe. That can't look good for future revenue - essentially makes any revenue growth in those regions extremely difficult and puts a head wind on the entire company. This of course is reflected in their.... 1.3% jump upwards in share price. Gotta love them shares.

1.3% jump today, but FB is trading down 25% after hours.

+44% profit margin. They have so much room to shrink in terms of margins and still make money!

If you do not own this stock you must be insane! *

Dislaimer: I'm long over $1MM since it was 2014 when it was at ~$59 and sold 30% at around $150 when stock crashed.

* I am not broker nor I advise you to buy or sell. Just stating my personal opinion.

I'd rather not lend my money to evil people.

may i ask what stocks you're backing?

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