Facebook managed to beat Wall Street’s estimates in its Q4 earnings amidst a constant beat down in the press. Facebook hit 2.32 billion monthly users, up 2.2 perecent from 2.27 billion last quarter, speeding up its growth rate. Facebook climbed to 1.52 billion daily active users from 1.49 billion last quarter for a 2 percent growth rate that dwarfed last quarter’s 1.36 percent.

Facebook earned $16.91 billion off all those users with a $2.38 GAAP earnings per share. Those numbers handily beat Wall Street’s expectations of $16.39 billion in revenue and $2.18 GAAP earnings per share, plus 2.32 billion monthly and 1.51 billion daily active users. Facebook’s daily to monthly user ratio, or stickiness, held firm at 66 percent where it’s stayed for years, showing those still on Facebook aren’t using it much less.

Facebook shares had closed today at $150.42 but shot up over 11 percent following the record revenue and profit announcements to hover around $167. A big 30 percent year-over-year boost in average revenue per user in North America fueled those gains. Yet that’s still down from $186 where it was a year ago and a peak of $217 in July.

CEO Mark Zuckerberg went beyond his usual intro to the earnings report where he assures investors things are going well and highlights new opportunities. This quarter he noted “We’ve fundamentally changed how we run our company to focus on the biggest social issues, and we’re investing more to build new and inspiring ways for people to connect.”

Squeezing Money From The Olds

Facebook managed to grow its DAU in both the critical US & Canada and Europe markets where it earns the most money after stagnation or shrinkage in previous quarters. The fact that Facebook is no longer dwindling it its most lucrative markets is surely contributing to its share price climb. Facebook’s monthly active user plateaued in North America but roared up in Europe. That was shored up by a reversal of last quarter’s decline in Rest Of World average revenue per user, which fell 4.7% in Q3 but bounced back with 16.5 percent growth in Q4.

Facebook raked in $6.8 billion in profit this quarter as it slowed down hiring and only grew headcount 5 percent from 33,606 to 35,587. It seems Facebook has gotten to a comfortable place with its security staff-up in the wake of election interference, fake news, and content moderation troubles. Its revenue is up 30 percent year-over-year while profits grew 61 percent, which is pretty remarkable for a 15-year old technology company.

Earnings Call

Facebook’s plan to concentrate on product innovation in 2019 after focusing on security in 2018 was the core of today’s earnings call. Zuckerberg laid out a product roadmap for more ephemerality and encryption, how unifying the infrastructure of Facebook’s messaging apps will better connect Marketplace to WhatsApp, Groups will become an organizing function for more of the Facebook experience, and shopping features will crop up across the family of apps. You can read Zuckerberg’s full opening statement here.

New stats included 500 million daily Instagram Stories users and 2 million advertisers on Stories. Zuckerberg said he was pleasantly surprised by Facebook Portal sales but didn’t give specifics. He revealed 2.7 billion people now use Facebook’s family of apps each month. However, CFO David Wehner warned the company would eventually stop sharing Facebook-only stats, presumably to mask the shift of younger users to its other apps. He also cautioned that due to the shift of users from feeds to Stories that Facebook has less experience monetizing, and targeting headwinds due to increased privacy scrutiny, Facebook predicts mid-single digit revenue growth rate reductions each quarter this year.

While the quarter went well, morale isn’t quite as rosy. It’s been a brutal quarter for Facebook At least its swifter user growth rates show Facebook survived its biggest ever data breach without scaring off too many people. Meanwhile it’s continuously struggled with scandals like hiring opposition research firm Definers, and it saw its new teen app Lasso largely flop. Facebook will have to convince investors it knows how to win back the next generation, or at least keep squeezong a lot more money out of the last one like it did in Q4.

Source: Tech Crunch Mobiles | Facebook shares shoot up after strong Q4 earnings despite data breach

In response to TechCrunch’s investigation of Facebook paying teens and adults to install a VPN that lets it analyze all their phone’s traffic, Senator Mark Warner (D-VA) has sent a letter to Mark Zuckerberg. It admonishes Facebook for not spelling out exactly which data the Facebook Research app was collecting or giving users adequate information necessary to determine if they should accept payment in exchange for selling their privacy. Following our report, Apple banned Facebook’s Research app from iOS and shut down its internal employee-only workplace apps too as punishment, causing mayhem in Facebook’s office.

Warner wrote to Zuckerberg, “In both the case of Onavo and the Facebook Research project, I have concerns that users were not appropriately informed about the extent of Facebook’s data-gathering and the commercial purposes of this data collection. Facebook’s apparent lack of full transparency with users – particularly in the context of ‘research’ efforts – has been a source of frustration for me.”

Warner is working on writing new laws to govern data collection initiatives like Facebook Research. He asks Zuckerberg, “Will you commit to supporting legislation requiring individualized, informed consent in all instances of behavioral and market research conducted by large platforms on users?”

Senator Blumenthal’s fierce statement

Meanwhile, Senator Richard Blumenthal (D-CT) provided TechCrunch with a fiery statement regarding our investigation. He calls Facebook anti-competitive, which could fuel calls to regulate or break up Facebook, says the FTC must address the issue and that he’s planning to work with congress to safeguard teens’ privacy:

“Wiretapping teens is not research, and it should never be permissible. This is yet another astonishing example of Facebook’s complete disregard for data privacy and eagerness to engage in anti-competitive behavior. Instead of learning its lesson when it was caught spying on consumers using the supposedly ‘private’ Onavo VPN app, Facebook rebranded the intrusive app and circumvented Apple’s attempts to protect iPhone users. Facebook continues to demonstrate its eagerness to look over everyone’s shoulder and watch everything they do in order to make money. 

Mark Zuckerberg’s empty promises are not enough. The FTC needs to step up to the plate, and the Onavo app should be part of its investigation. I will also be writing to Apple and Google on Facebook’s egregious behavior, and working in Congress to make sure that teens are protected from Big Tech’s privacy intrusions.”

Senator Markey says stop surveiling teens

And finally, Senator Edward J. Markey (D-MA) requests that Facebook stop recruiting teens for its Research program, and notes he’ll push his “Do Not Track Kids” act in Congress:

“It is inherently manipulative to offer teens money in exchange for their personal information when younger users don’t have a clear understanding how much data they’re handing over and how sensitive it is. I strongly urge Facebook to immediately cease its recruitment of teens for its Research Program and explicitly prohibit minors from participating. Congress also needs to pass legislation that updates children’s online privacy rules for the 21st century. I will be reintroducing my ‘Do Not Track Kids Act’ to update the Children’s Online Privacy Protection Act by instituting key privacy safeguards for teens. 

But my concerns also extend to adult users. I am alarmed by reports that Facebook is not providing participants with complete information about the extent of the information that the company can access through this program. Consumers deserve simple and clear explanations of what data is being collected and how it being used.”

The senators’ statements do go a bit overboard. Though Facebook Research was aggressively competitive and potentially misleading, Blumenthal calling it “anti-competitive” is a stretch. And Warner’s questioning on whether “any user reasonably understood that they were giving Facebook root device access through the enterprise certificate” or that it uses the data to track competitors oversteps the bounds. Surely some savvy technologists did, but the question is whether all the teens and everyone else understood.

Facebook isn’t the only one paying users to analyze all their phone data. TechCrunch found that Google had a similar program called Screenwise Meter. Though it was more upfront about it, Google also appears to have violated Apple’s employee-only Enterprise Certificate rules. We may be seeing the start to an industry-wide crack down on market research surveillance apps that dangle gift cards in front of users to get them to give up a massive amount of privacy.

Warner’s full letter to Zuckerberg can be found below:

Dear Mr. Zuckerberg: 

I write to express concerns about allegations of Facebook’s latest efforts to monitor user activity. On January 29th, TechCrunch revealed that under the auspices of partnerships with beta testing firms, Facebook had begun paying users aged 13 to 35 to install an enterprise certificate, allowing Facebook to intercept all internet traffic to and from user devices. According to subsequent reporting by TechCrunch, Facebook relied on intermediaries that often “did not disclose Facebook’s involvement until users had begun the signup process.” Moreover, the advertisements used to recruit participants and the “Project Disclosure” make no mention of Facebook or the commercial purposes to which this data was allegedly put.

This arrangement comes in the wake of revelations that Facebook had previously engaged in similar efforts through a virtual private network (VPN) app, Onavo, that it owned and operated. According to a series of articles by the Wall Street Journal, Facebook used Onavo to scout emerging competitors by monitoring user activity – acquiring competitors in order to neutralize them as competitive threats, and in cases when that did not work, monitor usage patterns to inform Facebook’s own efforts to copy the features and innovations driving adoption of competitors’ apps. In 2017, my staff contacted Facebook with questions about how Facebook was promoting Onavo through its Facebook app – in particular, framing the app as a VPN that would “protect” users while omitting any reference to the main purpose of the app: allowing Facebook to gather market data on competitors.

Revelations in 2017 and 2018 prompted Apple to remove Onavo from its App Store in 2018 after concluding that the app violated its terms of service prohibitions on monitoring activity of other apps on a user’s device, as well as a requirement to make clear what user data will be collected and how it will be used. In both the case of Onavo and the Facebook Research project, I have concerns that users were not appropriately informed about the extent of Facebook’s data-gathering and the commercial purposes of this data collection.

Facebook’s apparent lack of full transparency with users – particularly in the context of ‘research’ efforts – has been a source of frustration for me. As you recall, I wrote the Federal Trade Commission in 2014 in the wake of revelations that Facebook had undertaken a behavioral experiment on hundreds of thousands of users, without obtaining their informed consent. In submitted questions to your Chief Operating Officer, Sheryl Sandberg, I once again raised these concerns, asking if Facebook provided for “individualized, informed consent” in all research projects with human subjects – and whether users had the ability to opt out of such research. In response, we learned that Facebook does not rely on individualized, informed consent (noting that users consent under the terms of the general Data Policy) and that users have no opportunity to opt out of being enrolled in research studies of their activity. In large part for this reason, I am working on legislation to require individualized, informed consent in all instances of behavioral and market research conducted by large platforms on users. 

Fair, robust competition serves as an impetus for innovation, product differentiation, and wider consumer choice. For these reasons, I request that you respond to the following questions: 

1. Do you think any user reasonably understood that they were giving Facebook root device access through the enterprise certificate? What specific steps did you take to ensure that users were properly informed of this access? 

2. Do you think any user reasonably understood that Facebook was using this data for commercial purposes, including to track competitors?

3. Will you release all participants from the confidentiality agreements Facebook made them sign?

4. As you know, I have begun working on legislation that would require large platforms such as Facebook to provide users, on a continual basis, with an estimate of the overall value of their data to the service provider. In this instance, Facebook seems to have developed valuations for at least some uses of the data that was collected (such as market research). This further emphasizes the need for users to understand fully what data is collected by Facebook, the full range of ways in which it is used, and how much it is worth to the company. Will you commit to supporting this legislation and exploring methods for valuing user data holistically?

5. Will you commit to supporting legislation requiring individualized, informed consent in all instances of behavioral and market research conducted by large platforms on users?

I look forward to receiving your responses within the next two weeks. If you should have any questions or concerns, please contact my office at 202-224-2023.

Source: Tech Crunch Mobiles | Senator Warner calls on Zuckerberg to support market research consent rules