Comment by chollida1 | Hacker News Reader

Comment by chollida1 | Hacker News Reader

Pre: - still 30% off highs

Numbers:

- 4Q EPS $2.38, Est. $2.18

- 4Q Rev. $16.91B, Est. $16.39B

- 4Q Mobile Ad Rev. as % Ad Rev. 93%

- Mobile represents 93% of ad revenue. Mark doesn't get enough credit for his big switch to mobile,

- Cost of revenue up 74 percent year over year

- Operating costs went up by 60%, Note this is more than their growth rate, really the only concerning thing from a good quarter

- Annual capex is $13.9 billion, pretty close to what Microsoft spends

- CFO is talking about phasing out Facebook only numbers and just disclosing total numbers(Insta, WhatsApp, and FB rolled into one)

-

Users:

- 4Q MAU 2.32B, Est. 2.32B

- 4Q DAU 1.52B, Est. 1.51B

- DAU up in Europe for first time in 2-3 quarters, Flat in North America

- instagram stories has 500M DAU

Misc:

- Headcount was 35,587 at year end. Increase of 42% for the year!!

- shares back up to Oct levels,

- turns out the markets like companies who can mint money and both users and advertisers just don't care at all about facebooks scandals

- https://investor.fb.com/files/doc_financials/2018/Q4/Q4-2018...

- more after hours trading than alot of stocks get during the entire day

- Zuckerberg saying that messaging growing faster than any other area. It will become more central to the social experience on Facebook's apps.

Always mind boggling to see those margins on that sort of volume. It’s no question FB is one of the greatest money-printing machines ever built.

Where does the growth come next though? Do they need to diversify their revenue streams away from advertising? Do they just start paying out dividends or can they really reinvest earnings at a sufficient return to satisfy shareholders?

Facebook's forward growth is going to come from persistently leveraging the userbase with a continued, gradual slowdown in growth. They don't need to diversify their revenue stream, they're growing sales at 30% and are larger than Oracle. Their social monopoly is going to make it very difficult for them to do meaningful acquisitions freely (unless they're well outside social). They couldn't easily buy the next YouTube, WhatsApp or Instagram at this point due to anti-trust concerns.

They did selectively start buying back shares recently as a form of capital return. I'd expect that to continue to the extent the stock remains modestly priced versus the business growth rate.

If all they do is keep on the same path, they easily get from here to $100+ billion in sales by doing nothing special beyond what they're already doing. Plus ~$35 billion in profit to go with it.

A mere 6% average sales growth per year for the next ten years gets them to $100b in sales. More likely, they get there in fiscal 2022 without much trouble.

That's assuming that anyone considers "social media" a monopoly category. Are they a social media company, or an online ad company? Which would give them several legitimate competitors. Or maybe they are just an advertising company, which makes them a medium sized fish in an ocean of advertising companies.

>Where does the growth come next though

I'm amazed they haven't taken a crack at Google with a search engine in their app. Imagine how valuable combining Facebook's data with the user intent of search? A lot of users would never leave the facebook app on their phone if they could get a search engine that's halfway decent. It seems like they are leaving a ton of money on the table as it stands

If its too much to develop their own maybe they could team up with Bing or something?

At that rate, they'd be better off going all in with a Chromebook-like product with Facebook OS and a fully encompassed ecosystem.

They tried that with mobile already, and with 93% of ad revenue from mobile I'm guessing laptops are pretty irrelevant to them even if they can make one sell with their own OS.

Operating costs going up makes sense if FB is hiring in order to attempt to address many of the issues that were highlighted throughout the year. I'd venture to say they will continue to grow this year, I think I just heard them mention that during the call.

Do you think that this chart of historical DAU (Daily Active Users) is correct? https://www.statista.com/statistics/346167/facebook-global-d...

Looks too stable to me (especially taking into account the scandals).

What's the definition of DAU anyway? E.g. if I used it on 2 days in a row, e.g. yesterday and today, and then do nothing, am I counted as a DAU or not for that quarter? Or maybe I have to be active for at least 50% of the total days of the quarter? Etc... .

Thx

Yes, I assume its correct, though to be clear, I have absolutely no way to validate it.

This quote from an analyst is one reason why I believe the user numbers.

> "It's hard to get people to stop using something they love. People love using these products, and there's these massive attacks that news outlets continue to heap on them, but consumers like these platforms and advertisers follow eyeballs. Most of Facebook's advertisers have no other place to go with a return on investment this good. This is clear proof."

Thx

In the meanwhile I found this (2015) about MAU: https://www.adweek.com/digital/monthly-active-users-definiti...

>>We define a monthly active user as a registered Facebook user who logged in and visited Facebook through our website or a mobile device, or used our Messenger app (and is also a registered Facebook user), in the last 30 days as of the date of measurement.

I suppose that DAU is the same, but of course daily.

Still, the chart looks too nice to me => personally, I always automatically mistrust any chart that looks that nice/regular.

Things tend to smooth out at high volumes.

Well, even if the volume is very high, the scandals had planetary coverage, therefore I would still expect to see some kind of impact? Or would it still be too little to show a variance in the trend?

Dumping here links of DAU/MAU charts of other apps (no specific selection - it's all what I was able to find):

MAU

- WeChat: https://www.statista.com/statistics/255778/number-of-active-...

- Twitter: https://www.statista.com/statistics/282087/number-of-monthly...

- Instagram: https://www.statista.com/statistics/253577/number-of-monthly...

DAU:

-Snapchat: https://www.statista.com/statistics/545967/snapchat-app-dau/

The most stable one seems to be the one of WeChat? I personally understood that without it, when living in China, your life can get very hard as you're not even able to pay for some services or get loans etc... (therefore there is a lot a direct pressure to use it).

> the scandals had planetary coverage, therefore I would still expect to see some kind of impact

You mean you'd expect a meaningful drop. Why? I expected very little consequence. People know Facebook doesn't cost them a monthly fee to use, they realize it's a huge entity that runs advertising to pay the bills. Everyone using the Internet these days is familiar with advertising online. The bulk of the users are precisely the ones that aren't shocked by the privacy scandal. They get to use Facebook and don't have to pay cash for it, they know the deal even if only broadly. Despite the endless attempts by the media to portray all FB users as ignorant.

Target had a huge scandal of stolen customer information. They didn't lose a big part of their sales. Equifax isn't going out of business. Few consumers stopped using Windows over Microsoft's business tactics in the 1990s or after. Walmart used to particularly pay their employees terribly and were pretty vicious cutthroats with suppliers and competitors (still are), outside of a tiny group none of it stopped people from shopping there. Amazon is guilty of a lot of that same behavior over the last two decades.

There's a required threshold for how bad Facebook's behavior would have to be, to turn the average user off of their 'free' service. They haven't got near that level yet. For most people it's a useful social utility that connects them to everyone they know and they don't have to pay money for it. Users will put up with a lot accordingly.

> the scandals had planetary coverage, therefore I would still expect to see some kind of impact

That would assume that news is accurately reporting reality. News is a business as well, you create issues, pile on, and gather ad impressions. There's definitely built-in pressure to exaggerate as a result.

Some of the most egregious is attributing short-term market trends with specific political issues (as opposed to noise or changes market fundamentals).

The darker side is when how news companies can shape public perception. In this case, the business models of the news are under attack by content aggregators like facebook and google.

Does that DAU include pages, business etc? So a single user could be double or triple counted?

Do we know what percentage of this could be from bots or other third party software?

I’d love to see independent polling via street surveys in a few countries to test their numbers.

and there's these massive attacks that news outlets continue to heap on them

https://en.wikipedia.org/wiki/Shooting_the_messenger

Following eyeballs and good ROI do not always go hand-in-hand.

In my dream world I'd love to see a more granular ARPU breakdown and how much of that came from growth in ad impressions/user vs. increased CPMs for advertisers as well as some sort of count of advertisers and their spend by tier of advertiser size. If I recall correctly, one of the fairly recent moves was cutting bad on FB feed ad frequency which resulted in increasing CPMs and in theory concentrating the advertiser base further to those big brands that can afford the higher CPMs.

Many advertisers are experiencing higher CPMs on FB properties as one might expect as they consolidate their hold on the market. As that continues, at a certain point ROI may not be that good, and they may see diminishing returns and look elsewhere. That's the normal cycle of saturation of ad sources. The question is how long FB can stretch that out and innovate.

That analyst seems behind the times at best.

I can’t remember when I last heard a person say “I love facebook.” Plenty saying “I hate it” though.

Maybe he was alluding to “are addicted to” or “are manipulated into using?”

People don’t use Facebook because they love it. They resent it and but use it, mostly. Which makes me think it’s headed for a steep decline.

I think a lot of people do love it. Not the company, of course, but many find the service it provides invaluable. Same goes to WeChat for example, I know quite some people who can't give it enough praise and it is arguably a worse offender than Facebook in all conceivable aspects.

What kind of things do they love about Facebook? I’d be interested to hear.

Again, not the company, but the service it provides. Like, I hate flying United but if they offer a cheaper price I'll do it.

First thing that comes to mind is Facebook Events, people around me use it all the time to organise birthday parties, moving, weddings and whatnot. Multiple people said to me that they "no longer use facebook but still use Facebook Events because it is great". Another example would be Messenger, at least here it is the only place where really almost everybody is, Whatsapp had that place before but that is Facebook too. And really, since they removed the weird snapchat-like stories thing from Messenger it there is nothing wrong with it, had Facebook not been what it is, I'd probably like it too.

The events is an interesting one, there aren't many alternatives if you're setting up a private event and IIRC the facebook event experience was good.

I also think "there's nothing wrong with messenger", I don't finds its experience loathsome like Facebook. That said, I also don't "love" it any more than Signal, Whatsapp, iMessage etc. It'll be really interesting to see how the unification of messaging works out - they could "Facebookify " it, I wonder how people will respond if there's a stronger focus on ads.

I would assume people who love WeChat are much more culturally accepting of surveillance given that most of its users are Chinese. Therefore I'm not sure whether a direct comparison makes sense.

> I would assume people who love WeChat are much more culturally accepting of surveillance

Or maybe they have no choice. If car companies only make black cars, it doesn't necessarily mean that black is everyone's favorite color.

Concerning networks they do actually, there were several mass migrations from service to service in China, QQ, RenRen, Weibo, now WeChat. If anything it seems that trendiness trumps the network effect. Now that they have added payments the hurdle might be larger though.

But, in the end all of them are monitored so there is no choice there. The main argument/excuse for acceptance seems to be that it is better to be spied on by your own government than somebody else's.

Few people outside of SV bubble are paying much attention to these scandals.

> What's the definition of DAU anyway?

AFAIK, you count the number unique users each day, and then compute the average over a period like a quarter. Media reports often make it sound like a DAU is someone who uses a service each and every day, but this is obviously wrong.

On page 9 of the PDF it shows expenses, and it lists marketing and sales as taking as much money as Research and Development, which sounds crazy to me. Facebook seems to spend an outrageous amount of money on programmers, I assume all of which goes to R&D. Do they also have this massive sales org I wasn't aware of? Where is this cost coming from?

thanks for this and other breakdowns. what was the primary driver for operating costs rising so much?

probably headcount

They probably need higher compensation to attract engineers at this point and their existing engineers are probably leaving the company at higher rate. They also need to hire a lot more people to tackle whatever issues they are trying to solve

building lots of datacenters

I'm guessing most of increase are the "moderators/censors" the media and political groups pressured them to hire. The same thing happened with google a couple of years ago when they were forced to hire thousands of people to moderate/censor content.

How many of the lost users were part of the Facebook account purge?

Reply on news.ycombinator.com