Facebook's Q1 results show users remain ambivalent about data

Facebook is under fire from many quarters, but is taking it on the chin like a good boxer. It will take many more punches for the platform to get knocked down.

In its latest earnings last night, Facebook reported 70 million new users in Q1, which met original expectations before public calls to delete the social-media app. The company now boasts 1.45 billion daily users and 2.2 billion monthly members. It will take many more punches to knock down the social media platform.

Much more than any other comparable company, Facebook suffers from a lack of user trust (see chart), and yet users stick by it. People have arguably never trusted Facebook much or minded how their data is used (it's a social platform after all), something reflected in the collective user shrug following the Cambridge Analytica scandal. Most people are happy to be the ‘product’ in the wider social media money making machine, even if Facebook itself argues that social media is the product and not its users.

When the Cambridge Analytica data protection scandal broke, one of its effects was the start of an online #DeleteFacebook movement. The campaign has had little effect so far. An online survey of 1,011 individuals, conducted by Kantar on behalf of The Drum, had found that 71% Facebook users are not considering deleting their accounts.

For the time being, all concerns are being shrugged off. Facebook posted $4.99 billion in quarterly profits on sales of $11.97 billion, topping analysts’ average estimates of $4.01 billion for net income and $11.41 billion in revenue.

“Despite facing important challenges, our community and business are off to a strong start in 2018,” Chief Executive Mark Zuckerberg said on a conference call. “Over the next three years we’re going to keep building Facebook to not only be a service that people love to use, but also one that’s good for people and good for society.”

Moving forward, will Facebook remain as resilient? A survey of 5,000 people from Blind, an anonymous social app for professionals, found that 24% tightened up their privacy settings. Users of all ages are expected to change their behaviour, driven by factors including social media fatigue, concerns over fake news and declining usage among young people. "There is definite weakness in Facebook usage that is becoming more noticeable," says principal analyst at eMarketer Debra Aho Williamson.

Facebook is the second-largest digital publisher in the world after Google (although like Google it prefers to be seen as just a platform for regulatory reasons). The company had 167.9 million monthly users in the US in 2017, representing 61.1% of internet users and 86.5% of social network users, according to eMarketer estimates. Globally it has some 2bn users (it also owns Instagram and WhatsApp). Advertisers love its mass reach and user profiles. The mantra that data is the new oil and data is king holds true and Facebook has tonnes of it.

Ad spend on the platform actually rose in May year-on-year despite current turmoil. Specifically, week-over-week during the weeks of March 17th (7%) and March 24th (15%) after the Cambridge Analytica news broke showed that brands continued to invest ad dollars in Facebook to reach consumers, according to 4C Insights. However, eMarketer thinks growth will slow in 2018 for a number of reasons.

“Ad spending growth on Facebook is expected to slow markedly this year, but that has less to do with Cambridge Analytica and more to do with larger ad-market dynamics. We expect marketers will continue to advertise on Facebook,” noted eMarketer in a recent report.

Facebook’s ad tools currently let advertisers target ads by people’s socioeconomic status, including income, net worth and zip code.

In a recent analyst note, Martin Garner, VP Internet, CCS Insight, wrote: "Although Facebook has now started to implement changes to improve users’ privacy, it also appears to be making moves to ensure that as few users as possible are fall into the grasps of the tough new European privacy regime known as GDPR. Contradictions like these do not build confidence and trust. Facebook has a real issue to address next week with its f8 developer conference, which is normally a platform for a number of product announcements. We suspect the agenda has seen a lot of last minute changes to address the recent privacy and election scandals head on, in order to help maintain developer confidence and momentum. It’s a hugely challenging time for Facebook because the threat of future regulation in a number of countries raises many unknowns for the company and its developers. Somehow Facebook must ensure that those scandals do not swamp the company.”

Under new European Union GDPR regulation, companies will be required to allow users to opt out of data collection. It may have an impact on Facebook, or it may not. The company is apparently telling users who want to opt out to delete their accounts.

Facebook may not be so cool with the kids any more but will be around for some time yet, a case of ‘as you were’ despite everything. Perhaps the biggest damage may be that its lax attitudes and ambivalent moral standards have likely derailed any aspirations CEO Mark Zuckeberg had of running for US presidency. Or will it?

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