
Facebook Q1 2018 Earnings Slides [pdf] - uptown
https://investor.fb.com/files/doc_financials/2018/Q1/Q1-2018-Earnings-Presentation-(1).pdf
======
roddux
My main takeaway from this is that #deleteFacebook has been a flash in the
pan-- their active user count is still increasing across all regions. Also to
note, FB only pay effectively 11% tax on some 12 billion dollars worth of
revenue.

~~~
thaumaturgy
Yeah, I may have to eat some crow from an argument the other day with another
HN user. Surveys and #deleteFacebook and protests and so forth seemed to
indicate that people did finally start getting interested in their own
privacy.

But no. Somehow, even with a declining youth demographic and widespread
reports of less time spent on site and the CA fiasco, they still ended up with
a growth of users in all markets.

I've wondered sometimes whether we're headed towards a post-privacy world, and
what it'll look like -- not just one in which there is little privacy, but one
in which privacy is not something that most people think about or value.

~~~
matte_black
We are not heading to a post-privacy world.

Post-Privacy means no one can get privacy even if they want it. That has never
been the case.

What you are merely seeing is people are ok with the amount of data that has
been collected on them. The lack of true widespread outrage means we are
either at the limit or we can still collect a bit more before users get
_really_ pissed.

~~~
putlake
> Post-Privacy means no one can get privacy even if they want it. That has
> never been the case.

We are already there.

3-letter govt agencies can listen track your calls, intercept your browsing
and read your email.

Unless you pay in cash and shop only at your local mom and pop shop, your
purchases are already being tracked and reported.

Your cellphone carrier is selling your information to third parties.[1]

You may not be on Facebook or WhatsApp but all your IRL friends and family
are. They have your phone number in their contacts list and they have shared
it with Google, Facebook, Twitter, Linkedin and God knows how many other
companies. They have taken your pictures and tagged you.

Other than a very small number of privacy-conscious people, which includes
living-off-the-grid doomsday preppers, the rest of the country is already
there.

1\. [https://www.csoonline.com/article/3233211/security/mobile-
ca...](https://www.csoonline.com/article/3233211/security/mobile-carriers-
sell-users-personal-information-to-third-parties.html)

~~~
gm-conspiracy
Why do you assume everybody is using email, has a cellphone, and only buys
goods from mega-corps?

~~~
incongruity
Why do you assume they’re not?

Constraining the discussion to America, you’d be far more wrong to assume
someone doesn't use the internet[1][2] or a cellphone.[3][4]

[1] [http://www.pewresearch.org/fact-tank/2018/03/05/some-
america...](http://www.pewresearch.org/fact-tank/2018/03/05/some-americans-
dont-use-the-internet-who-are-they/) \- Only 11% of American adults don’t use
the internet. Of 18-24 year olds, only 2% don’t. 2%. Holding narrowly onto
your assertion, the numbers are higher for poor, rural, elderly and non-high
school graduates.

[2][http://www.pewinternet.org/2018/03/01/social-media-use-
in-20...](http://www.pewinternet.org/2018/03/01/social-media-use-in-2018/) \-
68% of adults use Facebook. 73% use YouTube. Looking at 18-24 year olds, 95%
use YouTube.

[3][http://www.pewresearch.org/fact-tank/2017/06/28/10-facts-
abo...](http://www.pewresearch.org/fact-tank/2017/06/28/10-facts-about-
smartphones/) \- 77% of adults own a smartphone.

[4][http://www.pewinternet.org/fact-
sheet/mobile/](http://www.pewinternet.org/fact-sheet/mobile/) \- 95% of adults
own a cellphone.

Shopping at mega corps? Well, it’s well documented that Walmart has done a
good job of decimating local economies and there is definitely a
homogenization of retail options in the US - but even if you don’t shop at one
of them, if you use a credit or debit card, a mega-corp is tracking you.
Doubly so if you use a smartphone.

~~~
gm-conspiracy
So 16 million people are nobody, huh?

------
whyenot
The _median_ salary package at FB is $240,430[1]. Now I understand how that is
possible.

1\. [http://www.businessinsider.com/facebook-median-
pay-240000-20...](http://www.businessinsider.com/facebook-median-
pay-240000-2017-2018-4)

edit: salary package (salary, bonuses, and stock grants), not salary alone

~~~
objclxt
It's a slightly misleading figure because it includes __all __the stock grants
given in 2017. From the proxy statement:

> we calculated as actual salary paid to our employees for 2017 [...], actual
> bonus or sales commission earned by our employees in 2017, __and the value
> of equity awards granted to our employees in 2017 __

Specifically, if you joined in 2017 the value of your _entire_ initial stock
grant was used. This skews the median quite a bit. For example, if I joined
Facebook in 2017 at $150,000 and received a $400,000 RSU stock grant vesting
over four years my median annual income for the purposes of these SEC
calculations was $550,000 (even though most of that is in stock vesting over
the next four years).

~~~
ugh123
Does that mean you have to pay income tax on it in 2017 even though its not
fully realized until possibly 2021?

~~~
twblalock
You don't get taxed when they are granted. That would be pretty rough, because
a lot of people get several years of RSUs granted when they join a company.

When the RSUs vest, they are taxed as income. If you hold on to the shares for
a while before selling them, and they increase in value, you'll pay capital
gains taxes when you sell them.

------
alberth
Slide #3 & #5 are super interesting.

US/Canada is ~10% MAU but generates ~50% of the overall revenue.

I wonder why US generates so much revenue compared to its small user base

~~~
toephu2
Things in general are much more expensive in the U.S. compared with other
countries. Ads included.

~~~
iamaelephant
That is absolutely not true.

~~~
toephu2
At the same time, it is not absolutely untrue. I never said every single thing
and every single country.

------
et-al
May we please rename this to "Slides of Facebook Q1 2018 Earnings [pdf]"?

There's ambiguity in the current title with the idea of the earnings sliding
(which they didn't).

~~~
tompetry
I read it that way as well, was going to comment that yes quarterly earning
were down from Q4, but year over year Q1 is up a lot. Sliding uphill...

------
spiderPig
That's crazy. Their net income is almost the same as Google's with 1/3rd the
number of employees. I am surprised that they have 25k employees now, wow!

~~~
snaveed
Reported 2018 Q1 Net Income:

    
    
      Alphabet: $9.4 Billion [0]
      Facebook: $5.0 Billion [1]
    

[0]
[https://abc.xyz/investor/pdf/2018Q1_alphabet_earnings_releas...](https://abc.xyz/investor/pdf/2018Q1_alphabet_earnings_release.pdf)

[1]
[https://s21.q4cdn.com/399680738/files/doc_financials/2018/Q1...](https://s21.q4cdn.com/399680738/files/doc_financials/2018/Q1/Q1-2018-Earnings-
Presentation-\(1\).pdf)

~~~
acchow
Alphabet's net income will drop dramatically in the next quarter.

Google's VC investments booked a ton of gains all-at-once in the quarter (due
to an accounting change) which won't be recurring. About $2.4bn added to net
income.

------
lainga
Isn't it odd that DAUs/MAUs is consistently 66% in every quarter? Is this a
property of the typical use patterns of Facebook, or something they estimated
for SEC purposes?

EDIT: Also interesting to me that US/NA makes up ~12% of users but ~60% of ad
and payment revenue - a sort of downshifted Pareto principle.

~~~
adventured
Alphabet sees a similar tilt. They got 47% of their revenue from the US in
2017. From what I've read I'd guess they have 200 million to 225m product
users in the US market and probably 1.5 billion to 2b outside of it.

------
jkw
Are instagram revenues included the revenue numbers?

Are instagram dau included the dau numbers?

If not, anyone know how to back out those metrics?

~~~
jankassens
From a footnote on those slides:

> The numbers for DAUs and MAUs do not include Instagram, WhatsApp, or Oculus
> users unless they would otherwise qualify as such users, respectively, based
> on their other activities on Facebook.

------
alex_young
What is your privacy worth to you? It's worth $100 / year to FB, and it
probably costs you twice that much. (Assuming you live in the US.)

The average US user is worth > $100 / year now (forward looking) in
advertising revenue.

Advertising works because it increases spending on products by some larger
amount. Say this is 2x since there is significant risk and a lot of friction
to overcome.

This means that on average, a US person spends something like $200 a year
because they saw ads on FBs network.

This is simply astounding. Assuming 300m US users, this works out to $60b per
year.

Kind of the opposite of free.

~~~
ktta
>This means that on average, a US person spends something like $200 a year
because they saw ads on FBs network.

As much as I hate ads, this is a very poor way of understanding how
advertising works.

------
wmblaettler
How do you interpret an earnings slide? They seem to have a stronger Q4 YoY -
presumably due to increased ad spending leading up to the holiday buying
season, with a retraction every Q1. There was an 8% decline from Q4'16 to
Q1'17 and only a 7% decline from Q4'17 to Q1'18.

~~~
wmblaettler
Sorry, the I misread the title, it's literally the "slides" (slide deck) of Q1
earnings. Not a observation on a decline in earnings.

~~~
DisruptiveDave
Got a chuckle out of this. :)

------
mbesto
$16B in FCF in 2017

Thats what you call "printing cash".

~~~
spyspy
I've been long FB for a very long time now, and took the recent dip to grab
some more. People can complain about Facebook in terms of privacy all they
want, but as a company they are killing it.

~~~
tclancy
>People can complain about Facebook in terms of privacy all they want, but as
a company they are killing it.

Should make for a nice tombstone.

~~~
spyspy
I think I'll survive.

------
Rafuino
Can anyone explain why their operating margin is seemingly seasonal, improving
through the year?

And damn, that tax rate is insanely low. Looks like they're settling into
around 10% effective tax. Average across profitable companies is ~25%
according to an NYU study I linked to below. Damn.

www.stern.nyu.edu/~adamodar/pc/datasets/taxrate.xls

~~~
Piedmontese
My uninformed guess would be the seasonality is related to holiday spending.
Slides 5 and 6 show revenues by user location and Asia-pacific doesn't
consistently spike in Q4, while N. America and Europe seem to follow this
pattern.

Either that or accounting practices that go way above my head...

------
soared
Interesting - Appendix claims 13% of MAUs are duplicate or fraudulent
accounts.

------
petarb
What really got me is the average revenue per user in US & Canada is $23.59,
compared to less than half of that for Europe ($8.12).

------
100010735598198
[https://www.facebook.com/profile.php?id=100010735598198&hc_r...](https://www.facebook.com/profile.php?id=100010735598198&hc_ref=ARTdzhwYUlbQAsZm6XiwvB6YF67TfovlZokb-
JUaK0OHJo-NRi5dyToB5PTM201Vstc&fref=nf)

------
thisisit
In the meantime at the Sohn conference Jeffrey Gundlach said FB is a bubble:

[http://fortune.com/2018/04/23/facebook-bubble-
gundlach/](http://fortune.com/2018/04/23/facebook-bubble-gundlach/)

------
throwaway84742
Key takeaway: Wall Street doesn’t care about manufactured outrage. At least
not in the longer term.

------
rdlecler1
Find it strange that Europe has 1.8x the users of the US but only 40% of the
revenue.

~~~
richardfeynman
Clearly you don't work in advertising, my friend :-)

~~~
myroon5
Care to elaborate?

~~~
richardfeynman
The costs to advertisers (per impression, click, action) are all much higher
in the US market than EMEA.

~~~
rdlecler1
Yes, but why? Is there not an arbitrage opportunity here? Are European
advertisers paying less? Are Americans more gullible?

------
fergie
Interesting to note that usage and income peaked in late 2017, yet earnings
per share continues to rise unabated.

When there is too much shareholder pressure to extract money from struggling
companies, those companies tend to struggle.

~~~
oblio
Peaked? The yearly cycle peaks during Q4 because of the holiday season.

------
tintor
Why is FB advertising revenue per user almost 3x higher in US&Canada vs
Europe: $23.14 vs $8.01

Is it because of Europe being more restrictive on how much user data can be
used for advertising?

~~~
tehlike
It has to do with (mostly, directly) with GDP per capita. American consumers
earn & spend much more than europeans. NA also consumes much more than the
rest of the world.

------
m0meni
How'd the effective tax rate from Q3'17 go from 10% to 43% in Q4'17, and then
back to 11% in Q1'18?

~~~
collinf
From the Q4 Earnings Report, it looks like it was a one-time tax on foreign
earnings:

> 2017 Tax Cuts and Jobs Act

On December 22, 2017, the 2017 Tax Cuts and Jobs Act (the Tax Act) was enacted
into law and the new legislation contains several key tax provisions that
affected us, including a one-time mandatory transition tax on accumulated
foreign earnings and a reduction of the corporate income tax rate to 21%
effective January 1, 2018, among others. We are required to recognize the
effect of the tax law changes in the period of enactment, such as determining
the transition tax, remeasuring our U.S. deferred tax assets and liabilities,
and reassessing the net realizability of our deferred tax assets and
liabilities. In December 2017, the Securities and Exchange Commission (SEC)
staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting
Implications of the Tax Cuts and Jobs Act (SAB 118), which allows us to record
provisional amounts during a measurement period not to extend beyond one year
of the enactment date. As a result, our provision for income taxes increased
by $2.27 billion and our diluted EPS decreased by $0.77 for both the fourth
quarter and full year 2017. Since the Tax Act was passed late in the fourth
quarter of 2017, and ongoing guidance and accounting interpretation are
expected over the next 12 months, we consider the accounting of the transition
tax, deferred tax re-measurements, and other items to be provisional due to
the forthcoming guidance and our ongoing analysis of final year-end data and
tax positions. We expect to complete our analysis within the measurement
period in accordance with SAB 118.

[link] [https://investor.fb.com/investor-news/press-release-
details/...](https://investor.fb.com/investor-news/press-release-
details/2018/Facebook-Reports-Fourth-Quarter-and-Full-
Year-2017-Results/default.aspx)

------
rippeltippel
TL;DL:

1) Revenues are inversely proportional to number of active users, hinting at
cultural differences (e.g. US users may be more exposed to ads than EU users)

2) Overall income has fallen, but so have taxes and operating margin, leading
to higher net income and earnings per share.

------
scolson
So wait... In the US, my "value" to facebook is about $100 a year? (~24/q
rounded up)

Can I subscribe to facebook and opt out of all advertising and any data
sharing exposure with third-parties? That is totally worth $8-10/mo to me.

Edit: I get it. You don't like this idea, or you don't think it will work, or
you don't think facebook's investors will like it (full disclosure: I am one).
Why on earth should that stop me from putting my obviously flawed opinion out
there that I am sick of being the product and I'd love to opt out of that
process?

~~~
basementcat
I'd flip it around. What if Facebook paid me $$ to use it? Perhaps they could
have different incentive tiers in exchange for sharing additional info.

~~~
komali2
I thought that was the end game originally - reward users with cash for self
providing information companies usually need to pay survey companies to get.

~~~
oedenfield
Why pay users when they give it to you for free?

~~~
lotsofpulp
Why does Facebook spend money on employees then?

~~~
JimmyAustin
Presumably Facebook employees would work else where if they weren't paid.

~~~
lotsofpulp
My point was that what people aren't giving their info to Facebook for free,
Facebook has to spend money on their employees to create something which
people then want to use resulting in them getting information.

------
forkerenok
It slid in January of last year as well. Is it a seasonal effect? (can't find
FB's older figures.. I'm not good in digging up this kind of information)

~~~
ForrestN
What if this is evidence that many people see Facebook as a bad habit, and
start the new year determined to use it less?

~~~
mcmoose75
Every advertising-based business drops off q4->q1. There's a ton of ad spend
for the holidays, and just not as much commercial activity in general in q1.
The right way to compare it is 17q1->18q1, or 16Q4->17Q4, rather than QoQ
growth.

