Facebook Inc. posted strong results in the first three months of the year, despite a data-privacy scandal that erupted toward the end of the period, which sent the social media company scrambling to stem a growing public backlash against its mishandling of personal data.
But even as its financial results beat analyst expectations for the quarter, company executives also warned that it expected new European digital privacy laws set to come into effect next month would likely harm future growth.
Facebook has come under intense public pressure in the past six weeks, after revelations that British political consulting firm Cambridge Analytica misused the personal information of more than 87 million Facebook users.
The social media giant has overhauled many of its privacy and data-sharing policies amid a campaign to #deleteFacebook. Chief executive Mark Zuckerberg faced a two-day grilling on Capitol Hill earlier this month over his company’s business practices. He told analysts the public testimony was an “important moment” for the company. “Now the important thing is that we execute on all the things we need to do to keep people safe.”
On Tuesday, Facebook announced Kevin Martin, a former Republican chairman of the Federal Communications Commission, would become its interim head of U.S. policy, replacing chief privacy officer Erin Egan, as the company continues to grapple with the political fallout from the Cambridge Analytica controversy.
However, company executives were keen to emphasize that there was little evidence that either advertisers or users had abandoned the platform in large numbers since the Cambridge Analytica controversy broke in mid-March.
Revenue hit $US11.97-billion in the first three months of the year, up 50 per cent from the same period a year earlier and well ahead of analysts’ expectations. Facebook also added nearly 70 million global daily users compared with the previous quarter, pushing its global user base to 2.2 billion.
The number of daily active users in Canada and the U.S. – its most lucrative advertising demographic – rose by 100,000 from the previous quarter to 185 million. The uptick is an important measure for the company, which had posted its first-ever drop in North American users last year.
Several advertisers contacted the company with concerns in the days after the Cambridge Analytica controversy broke, and a “handful” stopped advertising on the platform, though one has since returned, chief operating officer Sheryl Sandberg told a call with analysts.
Financial analysts had largely predicted that advertisers would stick with Facebook given the company’s huge global user base and its sophisticated ad-targeting technology. A handful of advertisers, including Mozilla, maker of internet browser Firefox, pulled their ads from Facebook. Elon Musk deleted Facebook pages for Tesla and SpaceX and Apple chief executive Tim Cook took aim at the company, calling the digital advertising model “creepy.”
Mr. Zuckerberg defended his company’s business model, which has come under fire for using personal information to help advertisers target their products. He said the company was focused on growth and has no plans to scale back new ad-based product launches despite coming under fire from policymakers and privacy advocates.
“I know a lot of people have questions around the business model, and this is something that we at Facebook are very proud of,” he said. “We think that it’s the right way to build a service that connects everyone around the world.”
But even as executives highlighted the company’s growth in new users in the first quarter, they also refused to disclose updated figures for time spent on the platform.
In January, Mr. Zuckerberg said the number of hours users spent on Facebook had fallen by nearly 50 million hours a day in the final quarter of last year because of changes to the platform’s news feed to shift users away from passive consumption of content and toward more meaningful interactions.
On Wednesday, he said the company had continued to see declines in users engaging with certain content, such as viral videos.
Facebook also said it expected the number of users across Europe to stop growing or even drop as the General Data Protection Regulation, a sweeping set of digital-privacy rules, comes into force on May 25. The company plans to roll out changes in preparation for the European Union rules worldwide and said it would closely monitor any potential hit to its ad business.
The social media firm also warned that revenue growth was likely to slow through the rest of the year, while expenses would rise 50 to 60 per cent as it brought on new staff and built out new infrastructure.
Facebook added a record 2,600 new employees in the first quarter of the year, partly because of its pledge to double the number of content moderators to 20,000 by the end of this year. Employee head count was up nearly 50 per cent from the same period last year, to more than 27,700.