• by Karlene Lukovitz  @KLmarketdaily, October 30, 2020

Amid Facebook CEO Mark Zuckerberg’s testimony on content issues and Section 230 to the Senate Commerce Committee yesterday, his company’s flagship platform reported another quarter of impressive earnings results.

Despite the high-profile #StopHateForProfit boycott of the Facebook platform by roughly 1,000 advertisers during the month of July, Facebook’s advertising revenue rose 22% year-over-year, to $17.4 billion, in the quarter.

Meanwhile, net income rose 29%, to $7.8 billion, or $2.71 per share, beating analysts’ $1.91 per share estimate.

“We had a strong quarter as people and businesses continue to rely on our services to stay connected and create economic opportunity during these tough times,” Zuckerberg said in a statement.

So much for Facebook CFO Dave Wehner’s warning, in late July, that revenue growth deceleration during that month’s first three weeks due to the boycott and other factors might limit the core platform’s ad revenue growth to 10% in Q3.

Outside Wehner, few in the industry expected the boycott to dent Facebook’s ad revenue, and many noted that it might actually help the platform by opening up inventory, thereby enabling an influx of small-business advertisers.

That appears to have been the case: During the earnings call, Zuckerberg reported that Facebook now has 10 million active advertisers, up from 9 million in July.

Further, Wehner reported that Facebook expects fourth-quarter ad revenue growth to exceed Q3, “driven by continued strong advertiser demand during the holiday season.”

Facebook’s Q3 worldwide daily active users (DAUs) and monthly active users (MAUs) were each up 12% in Q3 on a year-over-year basis.

But DAUs in the U.S. and Canada declined slightly, from 198 million to 196 million.

Wehner said that had been expected in Q3, given that the pandemic drove elevated user levels in the first half. But he also said that Facebook expects North American user trends in Q4 to be flat or slightly down compared to Q3.

The executives did not elaborate on the reasons behind a continued decline in users. Have the boycott and/or continued controversy surrounding Facebook’s decisions in relation to ads and content relating to the election, and contributions to being used to promote violence, begun to dent the platform’s popularity in the U.S.? On the flip side, might user totals be down in part because of its move this month to remove millions of pages and accounts related to the dangerous QAnon conspiracy theory?  

During the Q3 earnings call, Zuckerberg summarized the steps Facebook has implemented in recent times to try to stem false information and voter suppression efforts, but allowed as how, “with a nation so divided,” there is “a risk of civil unrest” after the election.

Regarding 2021, Wehner’s outlook statement did not specify projections for advertising revenue or earnings, instead noting that Facebook “continue[s] to face a significant amount of uncertainty. We believe the pandemic has contributed to an acceleration in the shift of commerce from offline to online, and we experienced increasing demand for advertising as a result of this acceleration. Considering that online commerce is our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth.

“In addition, we expect more significant targeting and measurement headwinds in 2021,” he added. “This includes headwinds from platform changes, notably on Apple iOS 14, as well as those from the evolving regulatory landscape. There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress.”

As for Zuckerberg’s testimony before the Senate subcommittee, as reported Thursday in Digital News Daily based on his prepared testimony, he said that he supports revising Section 230, the federal law that protects web companies from liability for the content of users’ posts. 

He elaborated a bit, albeit vaguely, during Facebook’s earnings call, noting that an approach that has worked in France “focuses on creating a transparent process where companies have to report how they are doing moderation, reporting on how much harmful content in different categories is visible, the portion of the content on the service, and what percent of it our content moderation systems can get to before people need to report it... I think a system like that, that basically requires companies to meet certain thresholds or show improvement, basically aligns incentives in the right way." 

Zuckerberg also summarized the steps Facebook has implemented in recent times to try to stem false information and voter suppression efforts, but allowed as how, “with a nation so divided,” there is “a risk of civil unrest” after the election.