Facebook Inc was pummeled by public criticism over privacy issues during the second quarter, spurring an unprecedented appearance in the US Congress by chief executive officer Mark Zuckerberg. Do not expect to see much evidence of that turmoil in Facebook's earnings report on July 25.
The social media giant is expected to post a record of revenue and users in the quarter, thanks in part to the photo-sharing app. Instagram, according to analysts. The business, acquired for US $ 715mil (RM2.90bil) in 2012, now has more than 1 billion users.
Despite the drama, the graduation from a data-privacy scandal to stumbles in fighting fake news, shares of the Menlo Park, California-based company have gained 22% this year. Indicative.
Heather Bellini, an analyst at Goldman Sachs Group Inc., said checks with Facebook's advertising partners showed robust demand in the second quarter, especially for Instagram.
“Multiple partners cited the strength in Instagram user growth as a key driver” for buying more ads, Bellini wrote in a research note. Facebook to beat second-quarter revenue and earnings estimates.
While Facebook does not break out of revenue from Instagram, the unit is expected to generate US $ 8.06bil (RM32.69bil) in revenue in 2018, according to research firm EMarketer. Facebook has recently re-organized the company to put the Instagram division under Chris Cox, the head of the overall product. Kevin Systrom, to manage Instagram's product. So investors will be listening for more details on the symbiotic relationship between Facebook's divisions.
Facebook is expected to report 2.25 billion monthly active users in the second quarter, up 2.3% from the previous quarter, according to the average of seven analyst estimates compiled by Bloomberg News. Daily active users are expected to increase 2.1% to 1.48 billion. Analysts also estimated profit of US $ 1.71 a share and sales to jump 43% to US $ 13.32bil (RM54.03bil) from the period a year earlier.
In addition to engagement trends, investors will be looking for information on users' reaction to privacy-setting changes after new WhatsApp and Messenger, according to SunTrust analyst Youssef Squali.
Facebook has endured several stinging public scandals in recent months. Beside the CEO testimony over data practices, the company has been broadly criticized for its policies regarding content, which is implemented last week in Zuckerberg's defense of posts by those denying the Holocaust. Facebook has promised a cleaner site, with less spam, fake news and fake accounts, especially ahead of the US midterm elections. The company has been required advertisers that mention political topics to have their identities verified.
None of that has affected the popularity of Instagram. During the quarter, the photo-sharing app was announced as a way for its users to post a long-form video in the TV section, which could be home to Facebook's video ads in the future. It also reported that 400 million people now use its “stories” function, which allows people to post a video of Snap Inc's Snapchat.
The app could contribute US $ 20bil (RM81.13bil) to Facebook's revenue by 2020, or about a quarter of Facebook's revenue, Wells Fargo analyst Ken Sena said. And it's unlikely to cannibalise the growth Facebook has already achieved.
“Given the simultaneous growth in both Facebook and Instagram engagement over the last several years, we continue to see users supporting more than one platform,” he wrote. – Bloomberg