The debate on free speech between tech companies, specifically Facebook and Twitter, and politicians such as Elizabeth Warren is heating up and getting hotter than ever. Facebook refused to take down political ads from the right wing that the left consider fake news. Politicians led by Elizabeth Warren vehemently criticized the decision by Facebook arguing that it is helping the President win an election again.
Coming from the background that I have, I appreciate the freedom of speech in America which is enshrined in the Constitution. There is nothing better to ensure that everybody is free to voice his or her own opinion. The right in and of itself is great and good. The problem; however, lies in how people execute the right and how it is perceived by others.
When a right-winged party runs a political ads with controversial information, the party is within its right to do so. Facebook, as it claims to preserve the right to expression on its platform, chooses to honor it. There is nothing inherently wrong with that.
The problem is that when you exercise your right to free speech and spread out false information on others, you rob others of the right to be perceived truthfully. In that sense, is it still acceptable? Also, it then falls onto Facebook to be the guardian of truth, the entity that decides whether a piece of information is right or false. And it’s not an easy task. Whatever Facebook does will please one part of the population and piss off the rest. Whatever is truth to one party of an ideology will be considered fake news by the opposing party.
I fear that there is no definitive answers to this debate. The Internet and Facebook enable friction-less communication of information and, as a consequence, false information around the globe. That’s the byproduct of it. I don’t see how Facebook can do one without harming the other aspect of their operation. And as explained above, I don’t see how it can please anybody in its endeavor to preserve the First Amendment, but also to police the content.
When we pray for rain, we have to deal with the mud too. That’s my mentality in a lot of issues. In this case, I think we pray hard for the rain, but we are not ready to deal with the mud
GDPR Enforcement Tracker. 56 fines since its official introduction with Google’s $50 million fine as the biggest one so far. Whether GDPR met your expectation, the most important point I think is that without regulations, how could you hold companies accountable?
The Insulin Racket. A deep dive into why insulin, which is very critical to many’s well-being, became three times more expensive in the span of 10 years. Drug companies profited while lives were devastated.
This post will be about what I took away from reading Facebook’s quarterly report, presentation and earning call transcript.
There are 2.7 billion people using Facebook, Instagram, WhatsApp or Messenger each month with more than 2.1 billion people using at least one every day.
Stories have more than 500 million actives every day across all platforms
Mobile ad revenue by 30% year over year and made up of 93% of Facebook’s revenue this quarter
3 million advertisers use Stories Ads
Interactive Stories Ads was introduced last month
Facebook daily active users reached 1.56 billion with growth in India, Indonesia and Philippines leading the way. I wonder how this number relates to the 2.7 billion figure mentioned in the first bullet. For instance, I use all the apps from Facebook almost on a daily basis. Will I count as one or four users?
“The average price per ad decreased 4% and the number of ad impressions served across our services increased 32%”
“Payments and Other Fees revenue was $165 million, down 4% year-over-year and down 40% from Q4 which benefitted from holiday sales of Oculus and Portal.”
“Turning now to expenses. Total expenses were $11.8 billion, up 80%. This includes a $3 billion accrual taken in connection with the inquiry of the Federal Trade Commission into our platform and user data practices. This matter remains unresolved, and we estimate that the associated range of loss is between $3 billion and $5 billion. Absent this accrual our total expense growth rate would have been 46 percentage points lower. Operating income was $3.3 billion representing a 22% operating margin. Absent the accrual, operating margin would have been 20 percentage points higher.”
Daily Active Users YoY Growth
DAUs year-over-year growth in fiscal year 2019 slowed down compared to Q1 2018.
Monthly Active Users YoY Growth
The same sentiment goes for Monthly Active Users
Revenue YoY Growth
In Q1 2019, the revenue YoY growth in America is the largest among geographies, even bigger than that of APAC
Average Revenue Per User YoY Growth
Average Revenue Per User YoY Growth in US & America is pretty impressive given how competitive the market is and the size of Facebook’s already massive business.
Operating margin in 2018 contracted across the quarters compared to 2017. Even without the expected FTC fine, the margin would be 42%, lowered than that of previous first quarters in 2017 and 2018.
The numbers show that even though the growth slowed down in the first quarter of 2019 compared to Q1 2018, the business strength still seems to be pretty impressive, especially in APAC and North America. However, the company still has a lot of issues to deal with. The scandals related to the company are reported almost on a monthly basis. I suspect that ensuring the user safety and integrity of the platforms will be expensive and challenging. Plus, regulations and lawmakers are putting increasing pressure on Facebook. GDPR was mentioned repeatedly during the earning call in the sense that compliance with such regulations would negatively impact the business. In addition, Amazon has been growing fast as a fierce competitor in the advertising field, taking ads money from Google.
There is mention of cannibalization between Feed Ads and Stories Ads and Facebook building tools to help advertisers place ads in the most efficient and effective way
Now, we’re really applying that lesson to Stories. First, we need to convince marketers that people are using Stories, and I think having seen the mobile shift, their process – they’re getting that I think more quickly. But then we have to make it easy. So if you look at some of the tools and products I’ve talked about in the last couple of quarters, now you can – rather than us saying to you, go make a Stories ad you can just send us some pictures, some text, some very easy posts and we will create some Stories ads for you.
So our process is, we have one sales team selling all of these products; I think that helps us a lot because they already have those relationships. And we’re doing all we can to make it very easy to adopt the format. We also want to make this as automated as possible. So the long run view should be that you can give us maybe simple pictures, maybe simple videos, maybe an ad you’ve produced and we can do the placement for you. Because we think over time our systems will do a better job deciding where your ads should be placed and even helping you target. And so you’re seeing us build tools in that direction as well.
In terms of how much of its incremental, I’m sure not all of it is. There’s – definitely has to be some cannibalization for people who are doing feed ads as they get Stories. But we’ve seen that over time as we move people we’re able to get increasing shares, hopefully, of their budget but it’s our job to earn that. We tell marketers all over the world that we want to be the best dollar, the best minute, the best euro they spend and it’s up to us to prove that ROI and we’re going to continue to do that.
To convince people to pay for something, first it’s better to prove that the goods in question have value. By making Stories cheap, Facebook makes it an appealing option in addition to the Feed Ads. Though there is concern over cannibalization, Facebook doesn’t seem to have trouble increasing the revenue or the advertising Average Revenue Per User.
A few days ago, Mark Zuckerberg shared with the world his privacy-focused vision for Facebook moving forward. I understand that it may make sense strategically for the company, but I have real concerns over the feasibility of the strategy.
Lack of trust
Facebook has been littered with scandals for the past two years. The trust between the blue brand and users isn’t particularly at its all-time high. There have been documented evidence on the exodus of users from Facebook or the significant decrease in activities. If the trust is already shaky, why would users trust Facebook with every aspect of their life by using their proposed super app? (The super app concept is similar to WeChat, which users can use to do many things while on the platform such as booking movie tickets, paying bills, transferring money to friends and families…). If we can’t trust Facebook with just daily communication, how can we entrust it with more aspects of our life? If you can’t trust a dentist to treat your teeth, would you trust that dentist if he said he could fix your eyes?
I think one of the reasons why WeChat is successful is because of the target audience. Coming from that part of the world, I can say from personal experience that we Asians tend to not care as much as Western audience about privacy. I think there is a reason why WeChat hasn’t been as successful overseas as it is in China. If it were marketed to Western audience, given its relationship with the Chinese government and Western users’ concern over privacy, I don’t think it would be a triumphant effort. Hence, to convince Western users to use Facebook for everything, the trust has to be pretty solid. It’s not there now for sure.
Facebook has attracted unwelcome attention from lawmakers recently. And for a good reason. Even if they had done nothing wrong, which is definitely not the case, I suspect that the road to the super app vision wouldn’t be without robust challenges from the regulatory perspective.
Essentially, it’s all well and good for Facebook to change its stance on privacy. However, the trust isn’t there. I would love to see more concrete actions to transition from a company whose more than 95% of its revenue is from ads to a company that values privacy first. I am not a believer at the moment since Facebook has used up the rope we gave them already. If they want us to trust them again, they have to do it the hard way. And I think they have to hurry as well as the world won’t stand still for them. If this is the vision that makes business sense, others will go for it as well.
If they are committed and succeed in the future, kudos to them. Until then, I choose to remain skeptical of the vision.