What's going on?
Facebook reported fourth-quarter revenue and profit that was much better than expected on Wednesday. Investors gave the stock a big 👍, sending it up 11%.
What does this mean?
The number of daily scrollers and tappers across Facebook’s platforms was 9% higher than last year – up even in previously troublesome Europe – as #DeleteFacebook seemingly lost momentum. Higher spending from advertisers helped Facebook’s revenue to exceed investors’ expectations – with its Stories feature expected to become even bigger than the News Feed before long. Despite increased spending on new data privacy tech (total costs were over 60% higher than the same time last year), that extra revenue helped Facebook’s quarterly profit to beat forecasts too.
Why should I care?
For you personally: Too big to bail?
Increased scrutiny from data regulators has some questioning whether big tech companies should be broken up in order to reduce their influence. And that may have Facebook HQ rattled. Over the next year or two, the company plans to integrate the infrastructure behind its messaging apps, WhatsApp, Instagram, and Messenger. More sophisticated data on users would certainly command a higher price from Facebook’s ad customers – as long as it doesn’t fall foul of privacy laws. Since you probably rely on at least one of Facebook’s apps, it may soon be even harder to escape its clutches without feeling like a social pariah.
For markets: Investors pin up Facebook.
Facebook’s fate is likely of particular interest to Pinterest: the picture discovery app has its eye on an initial public offering (IPO) later this year and may raise as much as $1.5 billion from the process. When the company last raised money back in 2017, it was valued at $12 billion – but since then, Facebook and Snap Inc.’s share prices have fallen (Twitter’s, by contrast, have flown up). Investors’ appetite for social media stocks may have been renewed by Facebook’s positive update, which could affect how much money Pinterest’s able to pin down in its IPO – and at what price.