Facebook Rakes in Record Profit, but Zuckerberg Cautions Fighting Abuse Will Be Costly

Facebook CEO Uses Q3 Earnings to
AP Photo/Manu Fernadez

Facebook had reason to celebrate as it released its Q3 2017 earnings Wednesday, but CEO Mark Zuckerberg struck a somber tone as the company faces questions about its role in Russia’s campaign to influence the 2016 presidential elections.

“Our community continues to grow and our business is doing well,” Zuckerberg was quoted saying in the company’s earnings release.  “But none of that matters if our services are used in ways that don’t bring people closer together. We’re serious about preventing abuse on our platforms. We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”

During its Q3 earnings call, Zuckerberg announced that the company plans to double the number of staffers working on safety and security from 10,000 to 20,000. However, these numbers also include third-party contractors, and not just full-time Facebook employees. The company ended September with 23,165 employees.

Zuckerberg made these remarks as Facebook handily beat analysts’ estimates of its earnings. Facebook generated $10.33 billion in revenue during its third quarter, compared to $7 billion during the same quarter last year. The company’s net income for the quarter was $4.7 billion, compared to $2.4 billion a year ago. This equals diluted earnings of $1.59 per share, up from $0.90 last year.

Analysts had expected $9.88 billion in revenue, and a net profit of $1.29 per share.

Facebook also continued to grow its user base, attracting some 1.37 billion daily active users on average in September, compared to 1.18 billion a year ago. Monthly active users reached 2.07 billion by the end of September. The company said that it now generates 88 percent of its advertising revenue from mobile ads, compared to 84 percent during the same quarter last year.

Facebook still makes the vast majority of its money with advertising — more than 98 percent of the Q3 revenue came from ads, to be precise. However, the “payments and other fees segment” had its first sequential growth in the last 6 quarters. This could be an indicator that the company’s Oculus VR headset is finally seeing some growing sales.

Coincidentally, Facebook CFO David Wehner called out virtual and augmented reality as one of three factors driving up costs in 2018. The other two major investment areas would be safety and video content. “We are investing aggressively in video content to seed our watch tab,” he said. Altogether, investments are expected to grow by 45-60 percent year-over-year next year, Wehner said. “It is shaking up to be a significant investment year.”

Facebook’s earnings release happened to come during a week of intense hearings on Capitol Hill on the role big tech companies played in Russia’s attempts to undermine the 2016 election. During these hearings, Facebook admitted that messages posted by accounts controlled by Russian operators had reached some 126 million Facebook users.

During Wednesday’s earnings call, Zuckerberg gave a cautionary endorsement of legislative attempts to regulate political advertising online. “I think this would be very good if done well,” he said.