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Facebook Q1 Review: Big Revenue Beat Could Irk Regulators

Cheyne Gateley/VIP

Facebook is remarkably resilient in the face of controversies that might derail other smaller and less battle-tested companies.  

That’s the message that Facebook just sent to investors with its Q1 earnings results of $26.17 billion in revenue and earnings of $3.30 per share, figures that comfortably beat analyst expectations of $23.67 billion and $2.37 per share, respectively. 

Just keep in mind this big earnings beat came despite an astonishingly chaotic past few months for Facebook. 

In January, Facebook indefinitely suspended President Trump (we’re still waiting on the Trump verdict) after its platform played a role in inciting the Capitol insurrection. Zuckerberg in March testified at a Congressional hearing on Big Tech’s role in spreading misinformation. 

Facebook’s discomfort with Apple’s new privacy-focused iOS update has been made apparent along the way.  

And to top it all off, an old data leak (relating to over 500 million accounts) was reported on that seemed to just blow over — although these reports came in early April. 

But overcoming adversity is the name of the game for Facebook, which after all saw its total monthly user base rise by nearly 2% from Q1 to Q2 2018, which marked the first full quarter after the Cambridge Analytica scandal broke.  

Additionally, last Summer’s Facebook ad boycott didn’t significantly financially damage the social platform either.  

So it shouldn’t be shocking Facebook was still able to post solid revenue growth in Q1 despite chronically having its plate full in recent months.  

But what’s less of a sure thing now is how differently lawmakers may feel about Facebook following the company’s latest lucrative quarter: Does Facebook’s ability to experience such robust revenue and user growth in its chaotic Q1 not serve as the latest evidence to some of these individuals that it’s grown too powerful?

The year-over-year overall monthly user growth rate for Facebook in Q1 2021 was 9.6%, essentially flat with the comparable figure from Q1 of 2020, despite other notable social platforms rising in prominence since January.  

For example, Clubhouse grew from 2 million to 10 million weekly users during the quarter. Snap said in Q1 it experienced its highest YoY daily user growth rate in three years.  

Never mind Facebook has already copied Snapchat’s core Stories product and is developing its own Clubhouse competitor, some regulators might lean toward the previously mentioned stats to argue Facebook doesn’t face as much competition as it claims to. 

And Facebook’s big Q1 2021 YoY overall ad revenue growth of 46%, compared to just 17% one year prior, might just be evidence to some in Washington that the tech company continues to skate by unscathed while amplifying false information.

After all, Senators Amy Klobuchar (D-MN) and Ben Ray Luján (D-NM) earlier in April scolded Mark Zuckerberg and Jack Dorsey in a letter for continually failing to take adequate action against vaccine disinformation.  

So Facebook’s continued success may not bode particularly well for effort to get out of the regulatory spotlight.  

The FTC and 48 state attorneys general already sued Facebook in December over alleged anticompetitive behavior (Facebook recently pushed for the FTC case to be dismissed), while Rep./House Antitrust Subcomittee Chairman David Cicilline is currently looking at ways of regulating Big Tech through (via a series of perhaps 10 bills)

Potentially giving lawmakers more regulatory ammo is a scary thought for Facebook management and investors but remember significant government actions against companies are essentially always slow burns. 

And President Biden may also not push for Big Tech regulation as heavily as some of his party members expect him to. 

UCLA Law professor Alex Alben recently speculated that the Biden administration “will take a very balanced approach to the technology industry,” as they are mindful the tech industry is a big economic engine, in an interview with Variety Intelligence Platform.   

To get some fresh clues on how regulators are feeling about Facebook, keep an eye on the Oversight Board’s decision on the Trump case. 

Facebook’s subsequent reaction to the case — i.e., like if the social company establishes more guardrails to proactively identify objectionable content on its platform like hate speech as a result — could help it establish more goodwill with Capitol Hill.