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Facebook’s business is booming, but it says preventing abuse will cut into future profits

Facebook’s business is booming, but it says preventing abuse will cut into future profits


Under fire, the social network plans to spend big on security

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Facebook was front and center in the news today, testifying before legislators in Washington, DC about how state actors like Russia used its platform to try and influence the 2016 US election. The company said Russian agents spent just $46,000 on advertising — compared to the $81 million the Trump and Clinton campaigns dropped — but Russia’s effort still managed to reach over 126 million users.

CEO Mark Zuckerberg addressed the issues surrounding the company in the opening of its letter to investors. “Our community continues to grow and our business is doing well," Zuckerberg wrote. "But none of that matters if our services are used in ways that don't bring people closer together. We're serious about preventing abuse on our platforms. We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits."

“Protecting our community is more important than maximizing our profits.”

Facebook can afford to speak this way: the social network reported its third quarter earnings today, and things were predictably rosy. It made $10.1 billion in revenue over a three-month period, 49 percent more than the same quarter in 2016. It also booked $4.7 billion in profit, a whopping 79 percent increase from the same period last year. It’s operating margin is now up to 50 percent. Instagram Stories and WhatsApp Status, two ephemeral messaging products Facebook largely cribbed from Snapchat, have both now surpassed 300 million monthly active users, making them almost twice as popular as all of Snapchat.

It won’t show up in today’s earnings report, but Facebook’s expenses may rise in the near future. The company said repeatedly today that it is doubling the number of employees dedicated to policing its platform for things like child pornography, terrorism, or state-sponsored electioneering. Left unsaid was that the vast majority of these will probably be contractors hired through a third-party firm. Still, Facebook made clear that it expected to incur significant new costs because of this expansion.

1.3 billion people use Facebook every day, with more than 2 billion using it every month. Mobile advertising is now the vast majority of the company’s business, representing 88 percent of its revenue this quarter. It now has 23,165 employees, a 47 percent increase over this time last year.

Zuckerberg opened up today’s earnings call with a strongly worded promise to stamp out the use of Facebook for undermining democracy in the U.S.. On Russia’s use of the social network during the 2016 election he said, “what they did is wrong, and we are not going to stand for it.” He said he wanted investors to hear directly from him that this work would significantly undercut profitability. “I’m dead serious about this....protecting our community is more important than maximizing our profit.” Fiery words, although perhaps what you would expect from a CEO on a day when more than one law maker threatened to more heavily regulate Facebook if it couldn’t police itself well enough to prevent meddling in U.S. elections.