Facebook Stays Out of the Corner

Facebook


FB 1.14%

is like that kid in class who is constantly getting into trouble but still manages good grades—maddening, but still impressive.

Despite a nearly constant stream of negative headlines, Facebook reported decent second-quarter results on Wednesday. Revenue rose 28% year over year to $16.9 billion, beating analysts’ consensus and accelerating slightly from the previous quarter. The company also added about 39 million monthly active users during the quarter, bringing the total to 2.41 billion.

Excluding one-time items, which not surprisingly included an additional $2 billion accrual related to its settlement with the U.S. Federal Trade Commission, the company said earnings per share would have been $1.99, well above Wall Street’s estimate.

The results were tempered somewhat by comments during a call with analysts that new regulations could make product development more time consuming and costly.

Facebook’s shares are up 56% in the year to date, including gains on Wednesday following news that it would incur the largest privacy-related fine in FTC history. Its solid performance in the face of regulatory scrutiny makes additional oversight unlikely to meaningfully dent sentiment in the near term. Ultimately, there are 2.7 billion people using Facebook’s platforms each month, with more than three-quarters of them checking in each day.

Despite widespread data from analysts and third-party research that indicates eroding trust in Facebook’s platforms, daily usage—even of its core Facebook app—continues to grow. Facebook even added about 1 million daily users in its mature U.S. market in the quarter. This may be a positive side effect of the company’s new emphasis on Groups, which has likely resulted in more “Notifications” that draw users back to the platform regularly. While users were once alerted that a personal message or friend request awaited them on the app, alerts increasingly include friend “suggestions,” updates from members of groups joined and invitations to donate to various causes.

It seems to be working and that success is translating into advertising spending. While the company doesn’t break out ad spending by platform, a call held by digital-ad firm Kenshoo this week suggested a reacceleration of ad growth on Facebook’s core app.

So while the company endures nearly constant censure for past actions and proposed new ventures, it seems that, as long as its user base remains intact, its stock will follow suit. If Facebook is a company that regulators love to hate, it is also a platform that users hate to love.

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