Facebook profits take a hit after series of scandals

Facebook’s finances falter in the fourth quarter as profits slow

Facebook has seen growth in its net income slow to just 7% year-on-year for 2019 reaching just $7.3bn, compared to double-digit growth of 61% in the year prior, as expenses ballooned 51% to $46bn as it tried to overcome a series of privacy issues.

The slow growth has unnerved investors, accustomed to seemingly inexorable exponential increases. Facebook said it had to invest heavily in staff to address mounting privacy concerns, with headcount rising 27% year-over-year to reach 44,942 – including over 1,000 engineers dedicated to resolving privacy and content moderation problems.

The scale of this investment was demonstrated just last week when the social media giant pledged to grow its London office by a third.

The numbers bear out a warning issued by chief executive Mark Zuckerberg that addressing hate speech, election interference, and other content moderation and safety issues would be costly, until such time as its custom AI tools reach the proficiency required to manage the task automatically.

Shares in the firm dropped more than 6% in after-hours trade.

Facebook’s troubles came to a head in 2017 with an expose on how data had been shared with Cambridge Analytica ​to influence political advertising during the 2016 US presidential election and Brexit vote.

As a result of privacy concerns, US regulators announced a record $5bn fine against Facebook in July.

It's also been heavily criticized for its content moderation policies, particularly following the New Zealand terror attackes when millions of videos spread in just 24 hours, and the propagation of fake news.

More recently, it's faced backlash over decision not to police political adverts on its site for false content.

On Wednesday, the platform also said it had agreed to pay $550m to settle a lawsuit over the use of photos for its facial recognition technology.

"My goal for this next decade isn't to be liked but to be understood," Zuckerberg said on the results. "In order to be trusted, people need to know what you stand for."

Despite such headwinds Facebook continues to grow its userbase, confirming that it now counts 2.5 billion members worldwide, a rise of 2% from the 2.45 billion it recorded in the previous quarter.

Commenting on the figures Aaron Goldman, chief marketing officer at 4C Insights, was positive that the platform would recover.

“Our advertisers increased their spend on Facebook by 40% in the 4th quarter of 2019 compared to 2018. The platform continued to deliver strong results thanks to the combination of audience scale, engaging content, and advertising precision," he said.

“Looking ahead we expect to see continued growth as the Stories format continues to get traction with both consumers and brands. We are also seeing strength across Facebook and Instagram with video ads as part of a cross-channel approach to managing reach and frequency. Additionally, the rollout of Instagram checkout is helping bring more commercial intent to the platform which will further drive positive business outcomes for marketers.”

Facebook’s most recent effort to get ahead of the debate has seen it introduce new privacy and third-party tracking settings to empower users to take control of their own digital footprint.

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