What's going on?
Facebook reported first-quarter revenue that was slightly higher than expected on Wednesday, helping the social media giant’s stock rise 8%.
What does this mean?
Sure, things are getting tougher for Facebook: costs are still rising (up 80% on the same time last year) as the company works to allay privacy concerns and plug data leaks. But that doesn’t seem to be turning people off Facebook, Instagram, or WhatsApp: monthly active users last quarter were up 8% on last year. And that scroller derby helped rake in more money from advertisers seeking to reach users – particularly Generation Z – across their timelines and Stories. Instagram has proved an especially lucrative cash cow for Facebook since its founders unfriended the company last year.
Why should I care?
For markets: With great power can come great backlash.
According to the Wall Street Journal, half of American companies resemble Facebook in having their CEO and chairman be one and the same person. That can streamline decision making – but if Facebook and its money-making ads keep going dark or flirting with record fines for inadequate data protection (Facebook put aside $3 billion last quarter just in case, meaning it made less profit than predicted), disgruntled investors may try to seize the Iron Throne. Indeed, a group of shareholders is currently pushing to reduce the influence of Facebook founder Mark Zuckerberg’s stake in the company – and to remove him as chairman, à la Tesla (tweet this).
The bigger picture: Just don’t slip…
Most companies have beaten investors’ perhaps too-pessimistic forecasts for first-quarter earnings so far, helping push major stock markets to new record highs. Even much-maligned social media rival Snap Inc. posted higher-than-expected quarterly revenue late on Tuesday. But for those falling short of forecasts, the punishment is severe: stocks of those companies have dropped 4% on average in the days surrounding their updates, according to FactSet – more than usual for the last five years.