Facebook Profit Jumps 79%--Update
November 01 2017 - 7:48PM
Dow Jones News
By Deepa Seetharaman
Facebook Inc. extended its dominance in online advertising in
the third quarter but said it would sacrifice some future growth to
invest more heavily in its safety and security operations to
address the growing scrutiny of its power and influence.
The social-media giant reported a 79% jump in third-quarter
profit on Wednesday, the same day lawmakers grilled executives from
Facebook, Twitter Inc. and Alphabet Inc.'s Google during
congressional hearings that focused on alleged Russian
propagandists' activity during the election. Facebook and Google
together capture the bulk of the growth in digital advertising.
Facebook plans to double the number of employees and contractors
who handle safety and security issues to 20,000 by the end of 2018.
It is also redoubling security-focused engineering efforts in some
areas and building new artificial-intelligence systems to detect
what Chief Executive Mark Zuckerberg described as "bad content and
bad actors." Facebook's 2018 expenses could rise as much as 60%
compared with 2017.
"I am dead serious about this," Mr. Zuckerberg told investors.
"I've directed our teams to invest so much in security on top of
the other investments we're making that it will significantly
impact our profitability going forward."
Facebook is confronting one of the toughest periods in its
13-year history. This week, Facebook's general counsel, alongside
representatives from Twitter and Google, faced a series of hostile
questions from U.S. lawmakers over its failure to detect the way
Russian propagandists used its platform to spread divisive
content.
The grilling raises the specter of regulation and added
scrutiny, which could slow Facebook's growth and ability to rapidly
develop new products. The crisis also put Facebook in the awkward
position of playing down the effectiveness of the Russian ads while
touting the strength of its ad targeting and reach to legitimate
advertisers.
Advertisers, too, are wary of Facebook's video ad products after
a series of missteps in calculating advertising performance.
"The underlying issue is whether Facebook can be sufficiently
trusted by stakeholders," said Pivotal Research analyst Brian
Weiser. "There's always been this concern that at the top of the
company they're not taking these matters seriously enough. Lack of
trust creates friction, lack of trust creates rules and those rules
come with costs."
Facebook reported a third-quarter profit of $1.59 a share, up
from 90 cents a share a year ago. The company also generated $10.33
billion in revenue, up from $7.01 billion in the prior year's
quarter.
The firestorm about Russia hasn't hurt Facebook's popularity.
The company increased its monthly active user base to 2.07
billion.
Its shares were down about 1.8% in after-hours trading. The
stock price is up more than 59% this year through Wednesday's
close.
Since the 2016 U.S. presidential election, Facebook has faced
immense criticism for allowing misinformation, propaganda and
violent videos to proliferate on its service and shape political
discourse around the world.
Facebook reinvigorated the debate two months ago after it
disclosed that Russian-linked Facebook accounts bought thousands of
ads that sought to inflame social and political tensions before and
after election.
In congressional hearings on Tuesday and Wednesday, General
Counsel Colin Stretch faced questions that went beyond Facebook's
role in the 2016 election and touched on its ad-targeting
capabilities and content policies.
Facebook said 146 million users saw posts from accounts linked
to the Internet Research Agency, a pro-Kremlin outfit that sought
to use Facebook to amplify social divisions in the U.S.
Facebook is relying on both human oversight and nascent
technology, like artificial intelligence, to address concerns.
Earlier this year, Facebook committed to hire a total of 4,000
people to review content and ads. The company is testing a feature
that would show some Facebook users more information about the
entities behind ads on its platform. Chief Operating Officer Sheryl
Sandberg said the company was exploring similar steps to inform
users about the people behind political pages on Facebook.
In March, Facebook added staff and started working on new
technology to more quickly detect live broadcasts on its platform
that show a user who might hurt him or herself. Facebook, which
largely relies on users to flag the videos, now reviews them within
10 minutes, Mr. Zuckerberg said Wednesday.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com
(END) Dow Jones Newswires
November 01, 2017 19:33 ET (23:33 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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