Facebook Q1 - Profits Double

As we mentioned in previous newsletters, last week Facebook released numbers that demolished Wall Street expectations. Revenue came in at $26 billion, generating earnings of $3.30 per share thanks to average revenue per user coming in at $9.27. Wall Street was expecting $23 billion, $2.37 and $8.40, respectively.

Facebook is an advertising company, serving 3.45 billion monthly users, up from 3.3 billion. Thanks to their unparalleled access to humanity's screen time, they were able to sell 12% more adverts this year and increase their cost per ad by an average of 30%. There are not many companies around that were able to grow their usage and increase their prices during the pandemic!

Demonstrating the power of the Facebook platform, their more recently launched 'Facebook Marketplace' feature already attracts over 1 billion people per month. Marketplace is where people list things they want to sell, think Gumtree but with verified users. I think my wife now spends more time on Marketplace than she does on the main platform.

Facebook might face regulatory headwinds in the future, but we think it will be a slap on the wrist at worse. Even if lawmakers get very tough, Facebook will have the ability to direct their current 3.4 billion user base to any adapted platform they create.

The hardest part of any business is building up a customer base. Facebook has already done the hard part, now they get to earn profits from those customers. Regardless of the form Facebook might take, they will still be able to monetise that base.