Facebook still cashing in on your data as sales surge

Mark Zuckerberg’s social network is going through the biggest crisis of its existence. But it’s still making gobs of money.

Richard Nieva Former senior reporter
Richard Nieva was a senior reporter for CNET News, focusing on Google and Yahoo. He previously worked for PandoDaily and Fortune Magazine, and his writing has appeared in The New York Times, on CNNMoney.com and on CJR.org.
Richard Nieva
3 min read

Facebook's Mark Zuckerberg faces Wall Street for the first time since the Cambridge Analytica scandal.

James Martin/CNET

In the last few weeks, Facebook CEO Mark Zuckerberg spent 10 hours getting grilled in two congressional hearings, the world's biggest social network has been slammed for privacy debacles and it's been accused of fueling genocide in Myanmar.

Oh, and Facebook has been criticized for its growth-at-any-cost mentality.

But even as he copes with the most tumultuous time in Facebook's 14-year history, Zuckerberg doesn't have to worry about one thing: money. Its advertising business is great and people don't seem to be abandoning the social network.

On Wednesday, Facebook said sales rose almost 50 percent year over year to $11.97 billion, beating analyst estimates of $11.41 billion. Mobile advertising revenue, the segment most coveted by marketers, accounted for 91 percent of the company's total ad revenue of $11.8 billion. 

Facebook makes its money primarily by selling ads personalized to individual users. The numbers indicate the company does that extremely well: Facebook said it made an average $5.45 in advertising revenue on each user worldwide in the quarter, and an average $23.14 on ad sales for each user in the US and Canada. 

Earnings per share were $1.69 in the first three months of 2018, well ahead of Wall Street's expectation of $1.35 in profit. 

"We have a responsibility to keep our community safe and secure, and we're going to invest heavily to do that," Zuckerberg said on a conference call with analysts. "At the same time, we also have a responsibility to keep moving forward."

The social network also said user engagement grew on all devices. The social network had 2.2 billion monthly users in the quarter, up 13 percent from the year before. Facebook also said its employee headcount grew to 27,742, a 48 percent increase year over year. That doesn't include the 20,000 contractors Zuckerberg has promised to add in security and content moderation before the year is over.  

Facebook's stock rose more than 7 percent in after-hours trading. 

After the scandal

Zuckerberg and company have been dealing with a lot of unhappy users, regulators, investors and advertisers after last month's scandal involving Cambridge Analytica, a digital consultancy that improperly accessed data on up to 87 million Facebook users without their consent. That's prompted questions about how the social network handles data about its 2.2 billion users and whether the company can be trusted to protect that information.

Today's numbers may not show the full effect of the scandal. Facebook first disclosed it was suspending Cambridge Analytica on March 16, with only about two weeks left in the quarter. That's why Facebook's results for the second quarter, which ends in June, may be more telling. But since March 16 to the close of market on Tuesday, Facebook's stock has fallen almost 14 percent. 

The Cambridge Analytica backlash triggered the hashtag #DeleteFacebook to trend on Twitter. High-profile people in the tech world said they were leaving the social network, including Brian Acton, cofounder of Facebook-owned WhatsApp, and Steve Wozniak, co-founder of Apple. Facebook COO Sheryl Sandberg said some advertisers had taken a "pause" with Facebook amid the scandal.

The heightened sensitivity around user privacy could affect Facebook in other ways. The GDPR, a rule in the European Union that gives people more control over their personal data, goes into effect May 25. Facebook CFO Dave Wehner said the new regulation could mean that user numbers in Europe may be "flat" in the second quarter. 

The scandal has also sparked debate over the business model of tech giants like Facebook and Google, which gather personal data on users to target ads at them. During Zuckerberg's congressional testimony, he teased the idea of a paid version of Facebook that presumably wouldn't sell ads. On Wednesday, Sandberg mentioned the idea again. "We certainly thought about lots of other forms of monetization including subscriptions, and we'll always continue to consider everything," she said.

Still, Facebook vigorously defended the advertising model on Wednesday. Sandberg said it was the only way to keep Facebook free and continue in its mission to "connect the world." 

"Advertising and protecting people's information are not at odds," she asserted. "We do both."

Update, 3:59 p.m. PT: Adds more detail from Facebook's conference call with analysts.   

Cambridge Analytica: Everything you need to know about Facebook's data mining scandal.

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