Saturday 18 November 2017

Facebook fails to cash in as it hits one billion users

Getty Images
Getty Images

Peter Flanagan New Technology Correspondent

FACEBOOK has hailed its billionth new user but the celebrations immediately sparked a storm of protest as analysts and rivals questioned the outlook for profits and how many people actually use the social networking site.

Shares in Facebook continued to slide yesterday despite the news that one in seven people worldwide now use the site as analysts challenged Facebook's method for measuring so-called active members.

Facebook defines an active user as someone who logs into the site at least once a month.

However, that covers people who use their Facebook account to log into other websites such as internet television site Netflix, and not just those who sign into their Facebook profile.

As it stands, it makes little money out of people who don't log into their own website.

The group's most recent results showed about 83 million user profiles were "fake".

Investors largely ignored yesterday's milestone, with shares down 0.4pc at $21.75 (€16.70) in late trading in New York.

The shares are down 43pc since it started trading last May, wiping $40bn off the value of the company.

Profitability

The falling share price has had a knock-on effect here where dozens of the 400 Dublin staff have seen the value of their shares fall by thousands of euro, leading to an internal conflict between the "hacker culture" that helped the company flourish in the early days, and the need now to boost profitability at the social media firm.

"The key is monetising those users," said Dan Ernst, an analyst with the Wall Street firm Hudson Square.

Facebook is experimenting with new ways of raising revenue from its user base.

Facebook is testing a model that allows users to promote their status updates for a fee, in much the same way that advertisers pay Facebook to insert their ads onto the website.

The social network is also set to allow advertisers to use even more targeted advertising based on a person's phone number and email address if they are available on their profile.

In announcing the one billion milestone, Mark Zuckerberg revealed that about 600 million of the website's users access the site through their phones.

That is another key battleground for Facebook.

In documents filed ahead of the company's flotation, the firm stated that mobile users may have a "material" impact on profits in the future as the company raises little or no revenue from its mobile applications.

Speaking yesterday, Mr Zuckerberg admitted that the company wasn't "killing it" but claimed the firm was still doing very well.

"We are making billions of dollars. But the future is really going to be about mobile, right? And the opportunities for growth are there," he said.

A host of early-stage investors have sold millions of dollars worth of stock in the company, while Bono's private equity firm Elevation Partners has also cashed out much of its holding in the company.

Irish Independent

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