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Facebook Doubles Down on Political Advertising Stance

Posted on Friday, Nov 6th 2020

Facebook (Nasdaq: FB) recently reported its third quarter results that surpassed the market’s expectations. But the company appears to be struggling to add users in mature markets including US, Canada, and even Europe.

Facebook’s Financials

Facebook’s Q3 revenues grew 22% over the year to $21.47 billion, ahead of the market’s estimates of $19.8 billion. Adjusted EPS was $2.40, surpassing the market’s forecast of $1.91.

Advertising revenues grew 22% to $21.22 billion and Other revenues dropped 7% to $249 million.

Daily active user (DAU) numbers for the core Facebook app grew 12% over the year to 1.82 billion and monthly active users (MAU) grew 12% to 2.74 billion. The number of people active on any one of its family of products, including WhatsApp and Instagram, grew 15% to 3.21 billion people per month. Daily active users on these applications were 2.54 billion.

But the numbers were not as impressive when compared with the previous quarter. Facebook’s user base in the US and Canada fell to 196 million daily active users from 198 million in Q2. Facebook attributed the decline to the higher than expected usage in the earlier quarter as users spent more time on the network during the initial days of the lockdowns. Facebook expects its user base in the US and Canada to remain flat or decrease in the fourth quarter. Within Europe, its user base remained flat at 305 million daily active users for the third consecutive quarter.

Facebook’s Political Stance

Facebook had faced a lot of controversy after the 2016 elections. It was blamed for its inability to control foreign intervention in the elections, and the company faces significant scrutiny in the recent elections as well. Initially, Facebook claimed that it won’t stop any political advertisements as they were part of its belief in allowing free speech. However, given the rising discontent over the past few months, Facebook ended up taking several measures.

It has been monitoring content posted on its sites and has taken down over 100 networks, including those from Russia, Iran, and China, and continues to block millions of potentially abusive accounts every day. Ads have been made more transparent by allowing people to understand who’s trying to gain their support. Ads now provide details such as who paid for it and the targeted audience. To run a political ad or a social issue viral feed, posts now need to go through an authorization process. Between March and September, it rejected 2.2 million ads that were trying to target the US population. It also built an ads library, where users are able to see any ad running on Facebook or Instagram, regardless of the targeted audience.

The 2020 US Presidential race has been a very tight one and all news and social media companies have had to step up their efforts to ensure that they do not promote misinformation that may cause public unrest. Facebook has also been taking several precautionary steps. It recently blocked new political and social issue ads from running in the week before the election. It also announced restrictions so that if a candidate or campaign attempts to declare victory before the final results are announced, Facebook will put a banner on the top of Facebook and Instagram feeds, notifying the users that the results are not finalized. For content that seeks to question the legality of the outcome of the election or any particular voting method, it is attaching an information label. It has also made several important content moderation decisions including banning QAnon and Holocaust denial content.

It has also focused on addressing voter suppression. Facebook worked with experts such as civil rights leaders to define policies that are aimed at prohibiting misrepresentations of voting rights and helping users understand the voting process in their community. Between March and mid-October, Facebook removed more than 135,000 content articles in the US for breaking its rules.

Facebook’s Service Upgrades

In addition to the election modifications, Facebook has also added onto its products. It is now working on a long-term infrastructure project for WhatsApp. This project will allow people to message across apps. Just like Instagram that allows users to use both Instagram messaging and Messenger, soon WhatsApp users will also be able to use these messaging platforms. It is also working on monetizing WhatsApp and recently announced plans to make it easier for people to buy products directly through a chat. It will integrate the feature with Facebook Shops, so that when small businesses set up a shop, they will be able to establish a commercial presence across all of its products.

Its stock is trading at $294.68 with a market capitalization of $839.33 billion. It had climbed to a 52-week high of $304.67 in August and hit a 52-week low of $137.10 in March this year.

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