Skip to main content
subscribers only

Facebook wants to be friends with investors again. That is asking a lot, after it made a mockery of their trust with a badly overpriced initial public offering and then released a set of second-quarter results seemingly designed to dispirit the remaining optimists. How do yesterday's results, considered as a reconciliatory bouquet, stack up?

The numbers are not going to make anyone forgive and forget but they leave open the possibility of warmer feelings in the future. Specifically, nothing was worse and one key metric was a little better. Revenue growth did not decelerate (and would have grown a bit but for currency headwinds). Monthly and daily user growth hung in there, too.

Revenue per user in North America grew 21 per cent, accelerating for the first time in over a year. That figure is important because North America is the company's oldest market, so it (one hopes) gives some sense of what revenues could look like in less developed markets, given time. Yes, costs expanded a little faster than revenue but an unblemished report would have been too much to hope for. Shares rose nearly 10 per cent in late trading.

Netflix, on the other hand, has not finished hurting feelings. The company previously said it expected to add as many as seven million new members to its U.S. streaming service in 2012; as of its third-quarter results, also released yesterday, it expects about five million. As the diminished subscriber expectations highlight, the question for Netflix investors remains simple to pose and hard to answer: What are the barriers to entry in the streaming video business? Can anyone with access to capital (Amazon, say) create a pretty good Netflix replica?

Unless answers to these questions are forthcoming, no one can hope that yesterday's disappointment – shares fell 16 per cent after-hours – to be the last.

Report an error

Tickers mentioned in this story