Facebook's APAC ad revenue jumps 33% but rise in expenses leads to fall in stocks

Facebook witnessed a 27% year-on-year (YOY) increase in advertising revenue to US$69.65 billion in 2019 (FY 2019). More specifically during the fourth quarter of its financial year (Q4 2019), Facebook's ad revenue for Asia Pacific was US$3.64 billion, while US and Canada had the lion's share of ad revenue at US$10.02 billion. CFO David Wehner said during the call that on a regional basis, ad revenue growth rates for Q4 2019 were the strongest in Asia Pacific (33%) and rest of the world (28%), while Europe (24%) and US and Canada (22%) grew more slowly.

Similar to the last quarter, Wehner said the impression growth was driven primarily by Facebook News Feed, Instagram Stories, and Instagram Feed. Facebook News Feed impression growth benefited largely from community growth and engagement trends on the Facebook app. The YOY decline in average price per ad was primarily driven by the ongoing mix shift towards ads on Stories and in geographies which monetise at lower rates, he explained.

Meanwhile, Facebook also posted a 51% jump in cost and expenses to US$46.71 billion for FY 2019, which Wehner said was driven primarily by depreciation related to its infrastructure spend. He added that R&D grew 36% and was driven primarily by increased investments in core product as well as its innovation efforts, particularly in AR/VR. Marketing and sales also grew 23% and was driven primarily by consumer and growth marketing.

Its operating margin for 2019, however, dropped from 45% to 34%. According to multiple media reports including CNBC, Facebook's stock fell by more than 7% after it posted an increase in cost and expenses and a dip in operating margin. Facebook's net income also dipped 16% to US$18.48 billion.

CFO Wehner said the company expects YOY total reported growth rate in Q1 2020 to decelerate by a low-to-mid single digit percentage point as compared to its Q4 2019 growth rate. Factors driving this deceleration include the maturity of its business, as well as the increasing impact from global privacy regulation and other ad targeting related headwinds. It also anticipates its 2020 total expenses to be in the range of US$54 to US$59 billion, unchanged from its prior outlook.

On the other hand, the Facebook app saw an increase in daily active users (DAU) and monthly active users (MAU). DAU for the app was 1.66 billion on average for December 2019, an increase of 9% YOY. MAU for the Facebook app was 2.50 billion as of 31 December, an increase of 8% YOY.

Meanwhile, the family of apps saw an increase in daily active people (DAP) and monthly active people (MAP). DAP for Facebook family of apps was 2.26 billion on average as of 31 December 2019, an increase of 11% YOY for the fourth quarter. MAP for the family of apps was 2.89 billion in 31 December, a 9% YOY increase.

Facebook defines DAP as a registered and logged-in user of Facebook, Instagram, Messenger, and/or WhatsApp who visited at least one of these family products through a mobile device application or using a web or mobile browser on a given day. MAP is defined as a registered and logged-in user of one or more family products who visited at least one of these products through a mobile device application or using a web or mobile browser in the last 30 days as of the date of measurement.

According to COO Sheryl Sandberg, consumers used its apps throughout the holiday season to take advantage of the best deals and shop for the perfect gifts.

As a result of this, Facebook saw particular strength with eCommerce and online retailers who optimised for measurable objectives, such as website visits or sales.

A strong end to the year

CEO Mark Zuckerberg (pictured) said it was a good quarter for its community and business and "a strong end to the year". According to him, there are now around 2.9 billion people using Facebook, Instagram, WhatsApp or Messenger each month, and around 2.3 billion people using at least one of its services daily. Meanwhile, there are now more than 140 million small businesses that use its services to grow.

Zuckerberg said that the product areas he is most focused on for the next chapter of the company are building out the private social platform and more intimate communities, enabling more commerce and payments, and delivering the next computing platform. He also reiterated the company's priorities for 2020 - making progress on the major social issues, building qualitatively new product experiences, continuing to grow its business, and communicating more transparently.

"My goal for this next decade isn't to be liked, but to be understood. In order to be trusted, people need to know what you stand for. So we're going to focus more on communicating our principles," he said. These include standing up for giving small businesses more opportunity and sophisticated tools against those who say targeted advertising is a problem, and giving people a voice against those who would censor people who don't agree with them.