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Facebook sales grow as users tick up; Zuckerberg defends political ads

Facebook sales grow as users tick up; Zuckerberg defends political ads
October 31, 2019
(Reuters) - Facebook Inc reported an uptick in users in lucrative markets and its third straight rise in quarterly sales growth, but the company’s controversial political ads stole the limelight when CEO Mark Zuckerberg spoke to analysts. Shares rose about 4.5% after hours to $196.64. That put the shares on track to eclipse their record closing high of $194.32 in June 2018, just before a dramatic drop that summer amid escalating costs. Over the last three years, Facebook, the world’s largest social media company, has faced rising hostility from both users and lawmakers over its handling of user data and its inability to ensure the integrity of its popular news feeds. Zuckerberg opened his earnings conference call on Wednesday by defending the company’s policy to run ads from politicians containing false or misleading claims, saying that Facebook did not want to stifle political speech, even as rival Twitter Inc said earlier in the day that it was banning political ads around the globe. Facebook on Monday confirmed to Reuters that some employees had criticized its policy in an internal letter. Zuckerberg estimated ads from politicians would account for under 0.5% of Facebook’s revenue next year. “I expect that this is going to be a very tough year,” he said, adding that controversies over political content could lead to investigations. Zuckerberg last week was barraged with aggressive questions by lawmakers over Facebook’s steps to combat misinformation ahead of next year’s presidential election when he appeared at a Congressional hearing. Facebook’s competitive practices currently are under investigation separately by the US Congress, Department of Justice, FTC and 47 state attorneys general. Zuckerberg said that much of the scrutiny would be around the company’s acquisition of Instagram in 2012, but he said that though Facebook took out a competitor, its eventual success was not guaranteed at the time. Facebook executives, whom analysts say typically offer conservative guidance, continued to warn that the company’s revenue could be hurt by external challenges including new features on Facebook and internet browsers enabling people to block the type of online tracking that has been essential to Facebook’s algorithms for targeting ads. But financial analysts said Facebook remains too popular among users for advertisers to ignore. “Yes, Facebook has a lot of challenges it must deal with, but increasing its revenue and user count isn’t one of them,” Debra Aho, eMarketer principal analyst, said in an email.

COST CONTROL

Facebook’s total expenses in the third quarter were $10.5 billion, up 32% compared with a year ago. The third-quarter operating margin was 41%, compared with 42% a year ago. Facebook forecast 2019 total expenses at approximately $46 billion to $48 billion, or an increase of 55% at the high end of the range compared with 2018. It estimated 2020 total expenses in the range of $54 billion to $59 billion, up 23% over this year’s estimate at the high end.