Facebook Beats on Earnings, Less Time Being Spent on the Platform

Facebook made a startling revelation yesterday: for the first time ever, it lost a million users in the US and Canada in Q4 2017, bringing its North American base down to 184 million.

Yesterday Facebook released its fourth-quarter and annual earnings report, and the company grew its advertising revenue by 49 percent year-over-year, and beat investor expectations by a good margin.

According to the report, the company posted $12.97 billion USD in revenue and $2.21 earnings per share (before factoring a deduction from the tax bill), compared to $12.55 billion in revenue and $1.95 earnings per share expected, per Yahoo Finance. User growth slowed, but was still up 14% year-over-year.

However, CEO Mark Zuckerberg made a startling announcement: “2017 was a strong year for Facebook, but it was also a hard one,” he said. “[…] Already last quarter, we made changes to show fewer viral videos to make sure people’s time is well spent. In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day. By focusing on meaningful connections, our community and business will be stronger over the long term.”

Facebook doesn’t typically disclose time spent as part of its earnings metrics. The fact that it did so this time, and to call out a decline, initially rattled investors. They were also scared by a slow-down in user growth, and sent Facebook’s stock down as much as 5% directly following the earnings release.

However, executives assured analysts and investors during the subsequent call that time spent alone isn’t translating to lost ad dollars. “All time spent on Facebook is not equal,” said Facebook CFO Sheryl Sandberg, who pointed out that more meaningful interaction between friends and family would offer advertisers new opportunities.

Facebook says this is a result of strategic changes to its News Feed to promote more meaningful engagement. Facebook has been changing the way it presents posts within its users news feed over the past couple of months, in part as a response to criticism that it had boosted false and misleading stories during the 2016 Presidential election.

Zuckerberg had already warned investors during the company’s Q3 2017 earnings call that some of these changes, including the hiring of many more employees to screen for inappropriate content and fake news, could impact the social media giant’s bottom line. He reiterated that warning Wednesday, and said that improving the quality of Facebook would be his personal challenge for 2018.