Wednesday, Jan 30th 2019

Facebook Powers Through Privacy Scandals in Q4


Consumers continued to use Facebook heavily in Q4. The network seemed resilient in light of all the media scrutiny around privacy.

The digital advertising juggernaut powered through privacy scandals with strong results in Q4. User growth and engagement were healthy, a sharp contrast to recent media scrutiny. Shares rose +12% after hours.

These results seemed to prove the resilience and network effect-driven moat of the Facebook platform.

The 1-Minute Takeaway##

All eyes seemed to be focused on two key signposts: user growth and engagement.

These metrics indicate the health of the Facebook network and its attractiveness to advertisers (how Facebook makes money).

User growth was solid##

Privacy troubles don't seem to have hurt new user signups. Existing users have not deleted Facebook en masse.

  • Daily and monthly active users grew by +9% globally, +1% in the U.S. & Canada, and +2-3% in Europe.
  • User growth was surprisingly positive compared to the constant negative news flow and increased scrutiny over data privacy.
  • We think solid growth in the U.S. and Europe alleviates some investor concerns that Facebook has saturated its more mature markets.

Engagement was solid##

Stable engagement across geographies suggests the Facebook network remains fairly healthy despite the negative press.

  • Globally, user engagement was fine in our view: down slightly from Q3, but 2/3rds of Facebook users checked the app daily.
  • In the U.S. & Canada, engagement grew for the first time in over two years. This was surprising to us given the incessant negative media headlines from U.S. press outlets in Q4.

Advertisers still love Facebook##

  • Advertisers continued to spend heavily on Facebook. Ad revenue grew +30%, with positive early signs from the relatively new Stories format.
  • We think Facebook ads are still more relevant and effective than pretty much any alternative because the company collects so much info on user activity across the web.
  • It's investing heavily to better secure that data, but the company still has a lot of work to do in our view.


Between the negative press attention and regulatory pressure from Washington, we believe there's a huge disconnect between the media and what's going on in the rest of the world.

Advertisers don't seem to be listening to either of those cohorts -- they're following the consumer. The dat shows that most consumers continue to use Facebook on a daily basis worldwide. We think that's what matters for the health of Facebook's network and its top and bottom line.

As of this writing, FB was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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