Published On: Thu, Feb 1st, 2018

Facebook Tweaks Prompt Fall In User Time

Facebook’s overhaul of its News Feed has reduced the amount of time people spend on the site and contributed to a quarterly decline in users in the US and Canada, the social network said.

Mark Zuckerberg

The firm has been making the changes amid increasing scrutiny of its ad business, role in political campaigns and broader social impact.

Boss Mark Zuckerberg said the tweaks would help the firm in the long-term.

He called 2017 “a strong year … but … also a hard one”.

The comments came as the firm released its latest results.

Facebook’s revenue soared 47% last year to more than $40bn (£28.2bn), while profits jumped 56% to nearly $16bn.

The gains came despite an unexpected $2.3bn tax payment due to the new US tax law, which included a one-off tax on overseas profits.

Mr Zuckerberg said the actions so far, which include showing fewer viral videos, have reduced time spent on Facebook by about 5% or roughly 50 million hours a day.

There are politicians, academics and even former executives lining up to tell Facebook what’s wrong with it, but Mark Zuckerberg has only ever trusted his own data.

And so these tweaks to the News Feed, above all else, are a result of what Facebook’s engineers have seen for themselves.

Mr Zuckerberg’s (pretty convincing) argument is that by not fixing the News Feed, the long-term health of the company could be in jeopardy – not because of Russian propaganda or fake news, but because it just won’t be fun or useful to use.

What we need to look out for is investors’ patience with him. Over the past two years Facebook has consistently beat expectations, and it did again today, even with the caveats. Will Wall Street cut him some slack as a result?

Daniel Ives, an analyst at GBH Insights, said the firm’s financial results were “robust” and described Facebook’s strategy as ‘the right medicine at the right time”.

“We believe this strategy will drive higher advertising pricing monetisation trends in the long-term for Facebook and was a move Zuckerberg & Co needed to make,” he said.

The company reported fourth quarter revenue of nearly $13bn, up 47% from the same period in 2016. Profits were $4.3bn, up 20% year-on-year, after the tax hit.

Facebook said it expects to pay an effective tax rate of 23% in 2017, slightly higher than last year.

Though the US tax overhaul slashed the corporate rate, it also imposed a one-time mandatory tax on overseas profits.

Facebook shares initially fell by more than 4% in after-hours trade, but rebounded quickly.