Facebook reported huge growth in Q1 profit and revenue, suggesting the social network giant suffered little fallout from recent major scandals, but analysts warn it is only a matter of time before reality bites.

Both daily active users (DAUs) and monthly active users (MAUs) increased 13 per cent in March (hitting 1.45 billion and 2.20 billion, respectively), indicating the #DeleteFacebook viral movement had no detrimental effect on usage.

Meanwhile, Q1 revenue leapt 49 per cent year-on-year to $11.96 billion and net income surged 63 per cent to $4.9 billion. Mobile advertising revenue represented 91 per cent of total ad sales in the period, up from 85 per cent in Q1 2017.

Mistakes
In a conference call with analysts, CEO Mark Zuckerberg once again admitted the company had made major mistakes (the most high profile of which is the Cambridge Analytica data privacy leak).

“We have important issues to address,” he stated. “For most of our existence, we’ve focused on all the good that connecting people can bring. But it’s clear now we didn’t do enough to prevent these tools from being used for harm as well, whether that’s foreign interference in elections, fake news, hate speech, or app developers and data privacy. So now, we’re going through every part of our relationship with people and making sure we’re taking a broad enough view of our responsibility, not just to build tools, but to make sure those tools are used for good. This means continuing to invest heavily in safety, security and privacy.”

Despite the impressive set of numbers, there is concern the company faces a troubled future. CCS Insight analyst Martin Garner warned the full impact of recent scandals will not play out for 12 months to 24 months, while his colleague Geoff Blaber argued “results like this [are] not helpful to Facebook in [the] current climate. This will only raise the volume on concerns.”

Radio Free Mobile’s Richard Windsor suggests this is just the eye of the storm and that there is worse to come: “I think that the issues around privacy, time spent, AI and potentially programmatic advertising will cause the numbers to disappoint this year.”

GDPR
One major challenge Facebook – and the online world in general – must deal with from next month is the introduction of the EU’s General Data Protection Regulation (GDPR). The company said it will extend these controls to everyone who uses Facebook regardless of where in the world they live, but in the conference call it admitted such efforts could hit user growth.

“We believe that European MAU and DAU may be flat to slightly down sequentially in Q2 as a result of the GDPR rollout,” commented CFO David Wehner. “Second, while we do not anticipate these changes will significantly impact advertising revenue, there is certainly the potential for some impact and we will be monitoring this closely.”

COO Sheryl Sandberg stressed Facebook expects to remain an attractive proposition to advertisers once GDPR is in full swing: “We’re going to all know a lot more after we roll out, but the thing that won’t change is that advertisers are going to look at the highest RoI opportunity. And what’s most important in winning budgets is relative performance in the industry. And so we think that certainly we want to provide the best advertising, we certainly want to provide the best measurement, but our ability to do so as long as things happen across the industry, which is what’s happening, I think we remain in a very strong position.”