Facebook Q3 - Users and Profits Grow

On Wednesday night Facebook reported quarterly numbers that were ahead of analyst expectations. The company had revenues of $17.7 billion which allowed them to generate a profit of $6 billion. Just to put that in Rand terms, they make R90 billion in profits every three months, or R30 billion every month. Discovery's market cap is R80 billion, that means Facebook could buy Discovery with one quarter's worth of profits. The key to the Facebook business model is the number of people using the platform. The graph below shows how their monthly active users (MAU), has continued to grow. They added around 200 million people to the platform over the last 12 months.



As the number of users grows, so do the advertisers clamouring to get content in front of potential customers. If you ever doubt that Facebook has massive potential, just look at the advertising spend in North America compared to the rest of the world. In the US and Canada, advertisers are spending an average of $34 per user, Europe is only $10 and Asia is $3. Europe has room to at least double in the near term!



The 'Zuck' (CEO Mark Zuckerberg) said in his earnings call that the year ahead might be tough for the company because politicians will probably use Facebook as a punching bag to score cheap points in the run up to the 2020 US election. I expect some headlines over the next year might cause some volatility in the share price, but these will be short term moves. As long as Facebook can add value to their users, the community will continue grow. Remember that they own Instagram and WhatsApp too. More users means more advertising revenue, and the cash printing machine will keep running.