Facebook Says Business Stays Strong Amid News Feed Changes

Facebook Inc. may be making major changes aimed at fixing its impact on society. But its business is as safe as ever.

That’s the message from executives after an adjustment to the news feed algorithm — the company’s biggest moneymaker — prompted investor concerns that user attention could drop off, curbing demand for advertising. Yes, the time spent on Facebook in the quarter declined by 5 percent, but it was by Facebook’s design, executives said, in order to promote a higher quality experience. Yes, there was a dip in North American user numbers for the first time ever, but only because Facebook is already so dominant in the region.

The company reported another record quarter of revenue, boosted by mobile advertising, and said they don’t see the North American user decline as an ongoing trend. Executives also said Facebook advertisers have responded positively to the changes so far and predicted an increase in the number of ad impressions this year across the platform.

Facebook’s year was marred by challenges that led Chief Executive Officer Mark Zuckerberg to rethink the company’s main product, the news feed, to focus on “meaningful” social interaction. He said on Wednesday that changes in the fourth quarter cut the number of viral videos in people’s feeds and reduced time spent on the service by roughly 50 million hours a day.

“The most important driver of our business has never been time spent by itself, it’s the quality of the conversations and connections,” Zuckerberg said.

Facebook reported 1.4 billion daily active users in the fourth quarter, slightly missing a 1.41 billion average estimate from three analysts surveyed by Bloomberg. That amounted to the slowest user growth on record. DAUs in the U.S. and Canada declined from 185 million in the third quarter to 184 million in the period, the company also reported.

The shares rose 1.3 percent to $189 in late trading, after closing in New York at $186.89.

Slowing Growth

Users are joining the platform at the slowest rate on record

Source: Bloomberg

Fourth-quarter revenue rose to $12.97 billion, beating the $12.6 billion average analysts’ estimate and demonstrating dominance in mobile advertising.

The company reported net income of $4.3 billion, or $1.44 a share, in the period. Recent U.S. tax law changes forced Facebook to set aside more money to pay taxes, cutting earnings by 77 cents a share, it said. Without that, profit would have been $2.21 a share. Analysts were looking for $1.95 a share, according to data compiled by Bloomberg.

Facebook has become more self-critical since revealing a campaign by Russia to spread political discord around the 2016 presidential election that reached an estimated 150 million U.S. users on Facebook and Instagram. The company has been cooperating with Congress, while publicly questioning whether social media is good for democracy and mental health.

Russia’s operation — in the U.S. and ahead of other elections around the world — was made easier by incentives on Facebook that reward attention-grabbing content. Zuckerberg is looking to tweak the news feed to emphasize news and advertising from trustworthy sources, local providers and authentic accounts.

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