Even Russia (mostly) can’t slow Facebook’s money machine

There are a lot of question marks about Facebook. It’s not clear whether its effort to remake itself into the world’s new living-room television will pay off. It’s not clear whether it can make money from the billions of people using its messaging technologies, WhatsApp and Messenger. And it’s not clear whether Facebook can stay relevant as people find other ways to spend their time or are simply put off by what the social network has become.
But there’s still a lot that’s right with Facebook. People have been complaining for years that they hate using Facebook, and yet it keeps commanding a growing amount of world’s time. And more crucially, Facebook keeps showing it is an
essential tool for modern firms to find their customers.
In the third quarter, Facebook said its revenue growth rate accelerated to 47 percent, and the company pulled in an operating profit margin of 50 percent. That is remarkable for any company, let alone one that is already one of the world’s biggest public companies by market value.
There are a couple of spots of worry, though. One, the average number of people who used Facebook or Facebook Messenger at least once a day reached 1.37 billion in September, and while the figure is impressively massive it was also the slowest year-over-year growth ever in daily users. The question is whether this was a blip or a sign that Facebook will have a tougher time drawing in more people. And second, CEO said that the company would hire more people to weed out misinformation on Facebook, a move that will ‘impact profitability.’
Still, the quarterly results showed Facebook’s business is in peak health. The surprisingly strong numbers came after a year of Facebook executives’ warnings that revenue growth would start to slow right
about now. Instead, growth has
re-accelerated. Facebook cautioned that it can’t keep stuffing more and more ads in news feed. Those factors aren’t yet denting Facebook’s sales growth, although they might in the future. It’s true that while Facebook’s core advertising business built around the news feed is going like gangbusters, the company hasn’t proved that it can mint money from hoped-for growth areas like its new ‘Watch’ section of TV-like videos, Messenger and more. Instagram seems to be a money machine, but Facebook doesn’t break out its revenue.
And as Facebook has turned in one impressive financial performance after another, it grows tougher to keep pulling out happy surprises for investors.
In a sign of high expectations, even the strong third-quarter performance was met initially with a spare uptick in Facebook’s stock price in after-hours trading and then a decline as investors digested Facebook’s forecast that profit margins would contract as it plans to boost operating spending by 45 to 60 percent next year. That includes the costs of the company’s belated realization that it needs to do more to take responsibility for its growing power to inform the world.
That means, yes, Facebook will need to spend more commensurate with its power. And there is pressure on the company to keep churning its news feed money machine while nurturing potential growth areas including mobile videos and its messaging apps. But for now, Facebook continues to be a combination of growth and profitability that few companies can match.

—Bloomberg