6 ms·

Facebook Q2 2018 Earnings

84 points by champagnepapi 8y ago

samschooler 8y ago
Looking at their average revenue per user. Even with the break down into regions, US users (the most premium users according to the report) make $25/year. I would easily pay $100/year for tracking free, advertising free Facebook.
- m_ke 8y ago
  Even if only 5% of your friends were on it?
  - kornish 8y ago
    That's a leading question. It could (in theory) be possible to come up with a plan that tracks and advertises to free users while letting people pay to maintain some privacies.
    - bitexploder 8y ago
      This creates a two tiered society in the future. Kind of Dystopian feeling.
      - maneesh 8y ago
        what? That's just a freemium model.
      - tmalsburg2 8y ago
        This is a joke, right?
        bitexploder 8y ago
        Heh, I guess I should have been more elaborate. It was half sarcastic, half philosophical. I was just imagining a future where resources/money only matter to purchase privacy and most essential needs are taken care of. Instead of rich poor, what if the future is those with privacy and those with out, or some shade of that? Maybe it will always be science fiction, but we live in an increasingly monitored world and that power could easily be turned on citizen.
    - joemag 8y ago
      It’s a great model for the users. The fact that it hasn’t seen significant adoption makes me think that it’s not viable one, though. If you think about it, advertisers would put much lesser value on the free tier users, so the free tier will collapse.
- adventured 8y ago
  You're looking at that wrong. That's $25 for just the quarter. They'll cross over $100 per user this year for the US & Canada. For Q4 it was $26.76 for that combined region, for example.
  - nabla9 8y ago
    I don't think that's correct. They must report yearly revenue per user quarterly.
    - adventured 8y ago
      It is correct, they generated $26 per user in the US and Canada in Q417. There's 185m daily active users in the US and Canada, driving $20+ billion in sales for 2018. The US + Canada market generates 3x the revenue per user versus the EU, and 10x the per user revenue of Asia Pacific. Here's the Q4 reporting: "But most of Facebook's money still comes from users in the U.S. and Canada, where that number is even higher: $26.76 per user." https://www.cnbc.com/2018/01/31/facebook-earnings-q4-2017-arpu.html https://www.cnbc.com/2018/01/31/facebook-earnings-q4-2017-ar... And here's a break-out on the regionals for past Q4 reports: https://www.statista.com/statistics/251328/facebooks-average-revenue-per-user-by-region/ https://www.statista.com/statistics/251328/facebooks-average...
      - nabla9 8y ago
        That's almost 30 cents per day per user!
- JTon 8y ago
  Me too. I'm not sure if I could trust FB not to track though. I'd always feel like they would collect anyways, "anonymize", and build a profile for users who opt into the paid service. For "internal" use of course. In fewer words, I simply don't trust FB, and I'm not sure if there's a good system to audit their data collection behaviours.
- joemag 8y ago
  Law of averages... The distribution might be such that the kind of user willing and able to pay $100 a year for a social network is worth a lot more than $100 a year to advertisers. No matter how you slice it, the ad supported model might just be a better flywheel than subrsciption based one.
- pkaye 8y ago
  You are looking at the average. What if the ones willing to pay $100/year are those worth more than $100/year.
  - bduerst 8y ago
    Yep. Just having the $100 disposable income for a social media site means you have disposable income for other things that advertisers would love to pay to show you.
- fortylove 8y ago
  I see people say things like this a lot on HN ("I would easily pay X for Y, if it meant no advertising"), and I worry that we are a bit of a self selecting population with the means for such things. Imagine you have family with 4 kids. Are you actually going to spend $600/year on facebook? Also, I wonder if the people who _wouldn't_ pay for a subscription are just quieter? And finally, would you really want to be on facebook if it lost half of its user base because that half didn't want to pay?
  - rainbowmverse 8y ago
    It's the "I'd buy that on a t-shirt" problem. People who say it don't usually mean it, and the few who do aren't worth the trouble of making it available.
danso 8y ago
Yikes, in the few minutes that I first loaded this Marketwatch story about the stock falling, $FB went from -19% to -24% in after-hours trading. https://www.marketwatch.com/story/facebook-stock-crushed-after-revenue-user-growth-miss-2018-07-25 https://www.marketwatch.com/story/facebook-stock-crushed-aft...
jedberg 8y ago
Market isn't happy. 25% drop in after hours trading. It'll be interesting to see if it recovers tomorrow like Netflix did (which then of course gave most of it back the next day again).
- Analemma_ 8y ago
  Jesus, I thought you must have made a typo, but it actually did drop 25%. That's nuts for a company of that size.
  - 21 8y ago
    It's after hours where there is little liquidity. The real test will be tomorrow.
- tmalsburg2 8y ago
  Income at an all-time high, revenue doubled in the last two years, but shareholders are unhappy? Could somebody please explain this to me?
  - huac 8y ago
    they expected more growth, and FB projected more costs.
  - jedberg 8y ago
    A lot of the stock price was based on expected extreme continued growth. They just explicitly said that the growth is slowing and will slow down more, so they're basically losing all of the priced in growth.
  - sago 8y ago
    The value perceived by shareholders is only partially related to the current revenues. It is about perceived future value. And shareholders are right to be spooked I think. Revenues have grown 47% for only 11% in MAU. I don't hold shares in Facebook, but combined with the feedback I hear from friends and family about Facebook becoming increasingly ad-obsessed and devoid of valuable content, that would make me very nervous too.
slivym 8y ago
It must be scaring the shit out of FB that their growth is stalled in the US & receding in Europe. That can't look good for future revenue - essentially makes any revenue growth in those regions extremely difficult and puts a head wind on the entire company. This of course is reflected in their.... 1.3% jump upwards in share price. Gotta love them shares.
- kornish 8y ago
  1.3% jump today, but FB is trading down 25% after hours.
propman 8y ago
Why is it dropping by 25%? I’m buying after hours but it just wiped off 150B in market cap over decent earnings. Beat eps, similar growth, slight dip in Europe expected, no dip in Canada or US.
- coralreef 8y ago
  Adjusted guidance for future growth, they expect revenue growth to slow down significantly.
  - adventured 8y ago
    It still makes zero sense, it's pure emotion. Unless the speculation is for something far worse: a rapid plunge to negative growth (that doesn't appear likely right now). Microsoft is growing at about 1/3 the rate of Facebook, and with the FB shares down 22% after hours (~$500b market cap), Microsoft has a real PE ratio at least 1/3 higher. The same crazy contrast exists for Google, Amazon, Netflix. This is an emotional mis-pricing by the market, just as the drop to $150x in March was. I haven't bought after hours, but if the emotionalism continues tomorrow, it's an easy buy on further weakness.
    - 21 8y ago
      > It still makes zero sense, it's pure emotion. It's pure machines. These are event trading algos (event means news in trading lingo). Anyway, if you believe it's a huge misprice, just go ahead and buy this amazing opportunity.
    - jasonmp85 8y ago
      > it's pure emotion Look if you wanna play pretend grown up slot machine at least understand what you're getting into.
      - adventured 8y ago
        > Look if you wanna play pretend grown up slot machine at least understand what you're getting into. I've got over a decade of experience as an accredited investor. The groundless insult with no other content to go with it is inappropriate for Hacker News and blatantly violates the site's rules. What made you so upset that you felt you needed to lash out toward a stranger on a forum? If you want the straight-forward argument: FB is an easy value play on the reaction. Assume a continued slowdown in growth, by just the end of fiscal 2020 they're at $35 billion in profit against an AH $500b market cap = 14 forward PE ratio. You have to be willing to bet on persistent multiple compression across years, I'm going to bet the stock goes up and maintains a reasonable multiple based on their growth rate being beyond that of their peers. One of the best value plays in tech on multiple vs growth rate. Match their multiple to Microsoft and Google, even despite having faster growth than both. Instead of a $500b market cap, in a little over two years they're at more like $900b-$1t. Or play it more conservatively, assume a fat discount vs Microsoft and Google, a 20-23 type PE ratio, then they're at a $700b-$800b market cap. That's a 40%-60% return in 30 months, on a conservative scenario.
rezashirazian 8y ago
Facebook hasn't been the best for a long time. It's easy to get lost behind rosy quarterly numbers and miss the forest for the trees. The platform has been on a decline and it's starting to show in its numbers.
- quanticle 8y ago
  There's a difference between decline and lack of growth. Facebook, at this point, has most of the internet connected population of the world signed up. That's a huge deal, and it means that even if Facebook MAU/DAU don't grow, they're in a good place to grow revenue, just by being the de facto gatekeeper for advertising going forward.
  - deleted 8y ago
    [deleted]
- skinnymuch 8y ago
  Facebook isn’t declining much. More so growth has just stalled. It’s still a huge company and Instagram will continue growing. If they can get Facebook Messenger and/or Whatsapp monetized to even a few bucks per user, that’ll add a decent chunk of change too.
  - moorhosj 8y ago
    Users declined in Europe which is their second highest revenue/user geography. Their future revenue targets were also revised lower (i.e. declined).
joering2 8y ago
+44% profit margin. They have so much room to shrink in terms of margins and still make money! If you do not own this stock you must be insane! * Dislaimer: I'm long over $1MM since it was 2014 when it was at ~$59 and sold 30% at around $150 when stock crashed. * I am not broker nor I advise you to buy or sell. Just stating my personal opinion.
- Zarath 8y ago
  I'd rather not lend my money to evil people.
  - djohnston 8y ago
    may i ask what stocks you're backing?
- swiss_beatz 8y ago
  Lol, now tell me about your losing trades
ejcx 8y ago
It's amazing to me how volatile tech stocks are even today. I remember buying Amazon and Netflix 5 years ago when each of them fell 33% on an earnings miss and it has worked out really well buying on "miss".
- nabla9 8y ago
  Even today?? They have years of profits and growth baked into their stock valuation.
dartdartdart 8y ago
Is there any information indicating the areas where they are increasing headcount the most like Alphabet does? Does Apple release that information too?
noncoml 8y ago
> Monthly active users also didn’t grow compared to the first quarter and remained steady at 241 million in the U.S. and Canada > Monthly active users shrank from the first quarter to 279 million from 282 million in Europe. Is this the beginning of the end?
- wesleytodd 8y ago
  One can hope
- nvr219 8y ago
  That would be lovely.
- cgb223 8y ago
  Is monthly active users just for the Facebook website, or all sites they own? (like instagram etc) how do the other sites compare?
- martinald 8y ago
  Big problem with network effects is they tend to unwind just as aggressively as they start. WhatsApp is very popular amongst my social circles in Europe, but I don't really know anyone who actively "uses FB" (as in posting content, actively friend requesting new people etc). I am sure they are still counted in MAU stats but are increasingly "zombie users", somewhat hooked on the addictive properties and notification spam FB delivers rather than getting actual value, which is unsustainable in the long run.
vinchuco 8y ago
What value does Facebook provide as a company? Do ads create value?
- deleted 8y ago
  [deleted]
- jedberg 8y ago
  As a company they provide value to their customers, who are advertisers, by delivering them prequalified leads.
  - vinchuco 8y ago
    So they help people part with their money. Then, if I was an advertiser, I'd put my money elsewhere: > For example, while Google users click on the first advertisement for search results an average of 8% of the time (80,000 clicks for every one million searches), Facebook's users click on advertisements an average of 0.04% of the time (400 clicks for every one million pages). https://en.m.wikipedia.org/wiki/Facebook https://en.m.wikipedia.org/wiki/Facebook
    - Sujan 8y ago
      So? Advertisers pay per click or even sale, so they don't care the least how many people "saw" their ad before that. Some agencies even sell this as a "branding" side effect.
- djohnston 8y ago
  senator, we sell ads
oh-kumudo 8y ago
Quite alarming, with the size of Facebook, the stock price could still suffer such a huge fluctuation...

84 points by champagnepapi 8y ago

Looking at their average revenue per user. Even with the break down into regions, US users (the most premium users according to the report) make $25/year. I would easily pay $100/year for tracking free, advertising free Facebook.

m_ke 8y ago
Even if only 5% of your friends were on it?
- kornish 8y ago
  That's a leading question. It could (in theory) be possible to come up with a plan that tracks and advertises to free users while letting people pay to maintain some privacies.
  - bitexploder 8y ago
    This creates a two tiered society in the future. Kind of Dystopian feeling.
    - maneesh 8y ago
      what? That's just a freemium model.
    - tmalsburg2 8y ago
      This is a joke, right?
      - bitexploder 8y ago
        Heh, I guess I should have been more elaborate. It was half sarcastic, half philosophical. I was just imagining a future where resources/money only matter to purchase privacy and most essential needs are taken care of. Instead of rich poor, what if the future is those with privacy and those with out, or some shade of that? Maybe it will always be science fiction, but we live in an increasingly monitored world and that power could easily be turned on citizen.
  - joemag 8y ago
    It’s a great model for the users. The fact that it hasn’t seen significant adoption makes me think that it’s not viable one, though. If you think about it, advertisers would put much lesser value on the free tier users, so the free tier will collapse.
adventured 8y ago
You're looking at that wrong. That's $25 for just the quarter. They'll cross over $100 per user this year for the US & Canada. For Q4 it was $26.76 for that combined region, for example.
- nabla9 8y ago
  I don't think that's correct. They must report yearly revenue per user quarterly.
  - adventured 8y ago
    It is correct, they generated $26 per user in the US and Canada in Q417. There's 185m daily active users in the US and Canada, driving $20+ billion in sales for 2018. The US + Canada market generates 3x the revenue per user versus the EU, and 10x the per user revenue of Asia Pacific. Here's the Q4 reporting: "But most of Facebook's money still comes from users in the U.S. and Canada, where that number is even higher: $26.76 per user." https://www.cnbc.com/2018/01/31/facebook-earnings-q4-2017-arpu.html https://www.cnbc.com/2018/01/31/facebook-earnings-q4-2017-ar... And here's a break-out on the regionals for past Q4 reports: https://www.statista.com/statistics/251328/facebooks-average-revenue-per-user-by-region/ https://www.statista.com/statistics/251328/facebooks-average...
    - nabla9 8y ago
      That's almost 30 cents per day per user!
JTon 8y ago
Me too. I'm not sure if I could trust FB not to track though. I'd always feel like they would collect anyways, "anonymize", and build a profile for users who opt into the paid service. For "internal" use of course. In fewer words, I simply don't trust FB, and I'm not sure if there's a good system to audit their data collection behaviours.
joemag 8y ago
Law of averages... The distribution might be such that the kind of user willing and able to pay $100 a year for a social network is worth a lot more than $100 a year to advertisers. No matter how you slice it, the ad supported model might just be a better flywheel than subrsciption based one.
pkaye 8y ago
You are looking at the average. What if the ones willing to pay $100/year are those worth more than $100/year.
- bduerst 8y ago
  Yep. Just having the $100 disposable income for a social media site means you have disposable income for other things that advertisers would love to pay to show you.
fortylove 8y ago
I see people say things like this a lot on HN ("I would easily pay X for Y, if it meant no advertising"), and I worry that we are a bit of a self selecting population with the means for such things. Imagine you have family with 4 kids. Are you actually going to spend $600/year on facebook? Also, I wonder if the people who _wouldn't_ pay for a subscription are just quieter? And finally, would you really want to be on facebook if it lost half of its user base because that half didn't want to pay?
- rainbowmverse 8y ago
  It's the "I'd buy that on a t-shirt" problem. People who say it don't usually mean it, and the few who do aren't worth the trouble of making it available.

danso 8y ago

Yikes, in the few minutes that I first loaded this Marketwatch story about the stock falling, $FB went from -19% to -24% in after-hours trading. https://www.marketwatch.com/story/facebook-stock-crushed-after-revenue-user-growth-miss-2018-07-25 https://www.marketwatch.com/story/facebook-stock-crushed-aft...

jedberg 8y ago

Market isn't happy. 25% drop in after hours trading. It'll be interesting to see if it recovers tomorrow like Netflix did (which then of course gave most of it back the next day again).

Analemma_ 8y ago
Jesus, I thought you must have made a typo, but it actually did drop 25%. That's nuts for a company of that size.
- 21 8y ago
  It's after hours where there is little liquidity. The real test will be tomorrow.
tmalsburg2 8y ago
Income at an all-time high, revenue doubled in the last two years, but shareholders are unhappy? Could somebody please explain this to me?
- huac 8y ago
  they expected more growth, and FB projected more costs.
- jedberg 8y ago
  A lot of the stock price was based on expected extreme continued growth. They just explicitly said that the growth is slowing and will slow down more, so they're basically losing all of the priced in growth.
- sago 8y ago
  The value perceived by shareholders is only partially related to the current revenues. It is about perceived future value. And shareholders are right to be spooked I think. Revenues have grown 47% for only 11% in MAU. I don't hold shares in Facebook, but combined with the feedback I hear from friends and family about Facebook becoming increasingly ad-obsessed and devoid of valuable content, that would make me very nervous too.

slivym 8y ago

It must be scaring the shit out of FB that their growth is stalled in the US & receding in Europe. That can't look good for future revenue - essentially makes any revenue growth in those regions extremely difficult and puts a head wind on the entire company. This of course is reflected in their.... 1.3% jump upwards in share price. Gotta love them shares.

kornish 8y ago
1.3% jump today, but FB is trading down 25% after hours.

propman 8y ago

Why is it dropping by 25%? I’m buying after hours but it just wiped off 150B in market cap over decent earnings. Beat eps, similar growth, slight dip in Europe expected, no dip in Canada or US.

coralreef 8y ago
Adjusted guidance for future growth, they expect revenue growth to slow down significantly.
- adventured 8y ago
  It still makes zero sense, it's pure emotion. Unless the speculation is for something far worse: a rapid plunge to negative growth (that doesn't appear likely right now). Microsoft is growing at about 1/3 the rate of Facebook, and with the FB shares down 22% after hours (~$500b market cap), Microsoft has a real PE ratio at least 1/3 higher. The same crazy contrast exists for Google, Amazon, Netflix. This is an emotional mis-pricing by the market, just as the drop to $150x in March was. I haven't bought after hours, but if the emotionalism continues tomorrow, it's an easy buy on further weakness.
  - 21 8y ago
    > It still makes zero sense, it's pure emotion. It's pure machines. These are event trading algos (event means news in trading lingo). Anyway, if you believe it's a huge misprice, just go ahead and buy this amazing opportunity.
  - jasonmp85 8y ago
    > it's pure emotion Look if you wanna play pretend grown up slot machine at least understand what you're getting into.
    - adventured 8y ago
      > Look if you wanna play pretend grown up slot machine at least understand what you're getting into. I've got over a decade of experience as an accredited investor. The groundless insult with no other content to go with it is inappropriate for Hacker News and blatantly violates the site's rules. What made you so upset that you felt you needed to lash out toward a stranger on a forum? If you want the straight-forward argument: FB is an easy value play on the reaction. Assume a continued slowdown in growth, by just the end of fiscal 2020 they're at $35 billion in profit against an AH $500b market cap = 14 forward PE ratio. You have to be willing to bet on persistent multiple compression across years, I'm going to bet the stock goes up and maintains a reasonable multiple based on their growth rate being beyond that of their peers. One of the best value plays in tech on multiple vs growth rate. Match their multiple to Microsoft and Google, even despite having faster growth than both. Instead of a $500b market cap, in a little over two years they're at more like $900b-$1t. Or play it more conservatively, assume a fat discount vs Microsoft and Google, a 20-23 type PE ratio, then they're at a $700b-$800b market cap. That's a 40%-60% return in 30 months, on a conservative scenario.

rezashirazian 8y ago

Facebook hasn't been the best for a long time. It's easy to get lost behind rosy quarterly numbers and miss the forest for the trees. The platform has been on a decline and it's starting to show in its numbers.

quanticle 8y ago
There's a difference between decline and lack of growth. Facebook, at this point, has most of the internet connected population of the world signed up. That's a huge deal, and it means that even if Facebook MAU/DAU don't grow, they're in a good place to grow revenue, just by being the de facto gatekeeper for advertising going forward.
- deleted 8y ago
  [deleted]
skinnymuch 8y ago
Facebook isn’t declining much. More so growth has just stalled. It’s still a huge company and Instagram will continue growing. If they can get Facebook Messenger and/or Whatsapp monetized to even a few bucks per user, that’ll add a decent chunk of change too.
- moorhosj 8y ago
  Users declined in Europe which is their second highest revenue/user geography. Their future revenue targets were also revised lower (i.e. declined).

joering2 8y ago

+44% profit margin. They have so much room to shrink in terms of margins and still make money! If you do not own this stock you must be insane! * Dislaimer: I'm long over $1MM since it was 2014 when it was at ~$59 and sold 30% at around $150 when stock crashed. * I am not broker nor I advise you to buy or sell. Just stating my personal opinion.

Zarath 8y ago
I'd rather not lend my money to evil people.
- djohnston 8y ago
  may i ask what stocks you're backing?
swiss_beatz 8y ago
Lol, now tell me about your losing trades

ejcx 8y ago

It's amazing to me how volatile tech stocks are even today. I remember buying Amazon and Netflix 5 years ago when each of them fell 33% on an earnings miss and it has worked out really well buying on "miss".

nabla9 8y ago
Even today?? They have years of profits and growth baked into their stock valuation.

dartdartdart 8y ago

Is there any information indicating the areas where they are increasing headcount the most like Alphabet does? Does Apple release that information too?

noncoml 8y ago

> Monthly active users also didn’t grow compared to the first quarter and remained steady at 241 million in the U.S. and Canada > Monthly active users shrank from the first quarter to 279 million from 282 million in Europe. Is this the beginning of the end?

wesleytodd 8y ago
One can hope
nvr219 8y ago
That would be lovely.
cgb223 8y ago
Is monthly active users just for the Facebook website, or all sites they own? (like instagram etc) how do the other sites compare?
martinald 8y ago
Big problem with network effects is they tend to unwind just as aggressively as they start. WhatsApp is very popular amongst my social circles in Europe, but I don't really know anyone who actively "uses FB" (as in posting content, actively friend requesting new people etc). I am sure they are still counted in MAU stats but are increasingly "zombie users", somewhat hooked on the addictive properties and notification spam FB delivers rather than getting actual value, which is unsustainable in the long run.

vinchuco 8y ago

What value does Facebook provide as a company? Do ads create value?

deleted 8y ago
[deleted]
jedberg 8y ago
As a company they provide value to their customers, who are advertisers, by delivering them prequalified leads.
- vinchuco 8y ago
  So they help people part with their money. Then, if I was an advertiser, I'd put my money elsewhere: > For example, while Google users click on the first advertisement for search results an average of 8% of the time (80,000 clicks for every one million searches), Facebook's users click on advertisements an average of 0.04% of the time (400 clicks for every one million pages). https://en.m.wikipedia.org/wiki/Facebook https://en.m.wikipedia.org/wiki/Facebook
  - Sujan 8y ago
    So? Advertisers pay per click or even sale, so they don't care the least how many people "saw" their ad before that. Some agencies even sell this as a "branding" side effect.
djohnston 8y ago
senator, we sell ads

oh-kumudo 8y ago

Quite alarming, with the size of Facebook, the stock price could still suffer such a huge fluctuation...