Crisis? What crisis?
Facebook reported stellar fourth-quarter and year-end financial results Wednesday, as my new Fortune colleague Danielle Abril explores in some depth. Quarterly revenues jumped 30% to nearly $17 billion, an astounding growth rate off such a large number. Profits soared 61% to almost $7 billion. Facebook has more than 1.5 billion users, up 9% from a year earlier, again, a shocking increase given its saturation in richer countries and also notable for the broad geographic distribution of the user gains.
In after-hours trading, Facebook’s shares soared.
It has become clearer than ever that Facebook’s problems—enabling the stealing of elections, encouraging the persecution of ethnic minorities, shameful peddling of the personal data of its users, tardily copping to these transgressions—don’t matter all that much outside of precincts dominated by the chattering classes, places like New York, Washington, and San Francisco. In the real world, millions of people still love posting photos of their perfectly posed lives, comparing themselves with high school classmates, and watching silly videos—all content Facebook doesn’t pay a dime to produce.
It’s a brilliant business model for CEO Mark Zuckerberg that throws off plenty of cash for hiring content chaperones and lobbyists to make his other problems go away. Not as if there were ever business problems in the first place.
Speaking of Facebook, I recommend this long article by the never brief but always excellent Ben Thompson. He addresses the same issue I wrote about last week, the mistake BuzzFeed and countless other publishers made thinking that Facebook would be their salvation/meal ticket. In “The BuzzFeed Lesson,” Thompson does something highly unusual in the media world: He admits he was wrong. He, like media executives who didn’t think things through properly, assumed Facebook would want to share the economics of the audiences it was attracting on the back of publishers’ intellectual property. Facebook, instead, kept the loot for itself, making a mockery not just of trying to leverage Facebook’s platform but also selling digital ads at all.
A telling comment by one of BuzzFeed’s laid off writers last week illustrated the industry’s naïvete. “Our work has always, always been celebrated, internally and by readers,” Jessica Testa told The New York Times. “We’ve changed laws, we’ve won awards, we have great traffic.” Testa is completely right about the quality of work she and her colleagues did. But she’s channeling the industry executives who over-invested in a business model that doesn’t work. Great traffic doesn’t matter in a world where Facebook and Google hoover up all the revenue. What counts is charging money for that great work.
Freeze frame. Facebook’s stock is soaring, as Adam mentioned, up 12% this morning–though after a rough past year when it lost 19%. And more bad, non-financial news: After the disclosure that Facebook was paying people including teenagers be tracked via a developer app, Apple kicked Facebook off its developer app distribution platform. The developer channel trick let Facebook bypass Apple’s app approval process, which would have otherwise blocked the data collecting on privacy grounds. As Adam also alluded to, Facebook hired three former privacy advocates including former Electronic Frontier Foundation attorney Nate Cardozo on Tuesday, hopefully so this sort of thing doesn’t happen again.
Do not answer that call. It’s not your imagination: the spam/robocalling epidemic is getting worse. An astounding 26.3 billion robocalls were received in the United States last year, up 46% over the number of calls received in 2017, according to a new report from Hiya, which makes a call screening app. The average person received 10 spam calls per month.
Triptych. One of the next generation of iPhones expected this fall may have three cameras on the back to aid in 3-D scanning for augmented reality apps, Bloomberg reports. Apple has also been testing iPhones that connect to chargers and headphones via USB-C instead of the company’s proprietary lightning port.
Let’s make a deal. As our own Clay Chandler has written about a few times, there have been many problems with Foxconn’s 2017 deal to build a major manufacturing plant in Wisconsin. On Wednesday, the Chinese company admitted it was rethinking the whole project, though it promised to still create as many as 13,000 jobs of some kind.
Priced in. It was a super busy day in the stock market for tech companies. Microsoft’s revenue grew 12% to $32.5 billion and its adjusted earnings per share increased 15% to $1.10. Sales were a bit less than analysts forecast and Microsoft’s shares were down 2% in premarket trading on Thursday. Qualcomm impressed even as its revenue slipped 20% to $4.8 billion (after being left out of all iPhones). Adjusted EPS of $1.20 were up 25% and better than analysts expected. Qualcomm shares gained 2%. At PayPal, net revenue increased 13% to $4.2 billion and adjusted EPS jumped 25% to 69 cents. Growing loan write offs and a lighter-than-expected forecast pushed its shares down 4%.
Among companies that reported Wednesday morning, AT&T saw its paying video customers fleeing at a rapid rate–it lost more than 650,000 last quarter. Revenue rose 15% to $48 billion (thank you, Time Warner) and adjusted EPS improved by 10% to 86 cents. Its shares sank 4%. Advanced Micro Devices said its revenue increased 6% to $1.4 billion and adjusted EPS of 8 cents were up from 1 cent. But the big news was that it forecast sales would only dip 24% next quarter and would still grow overall in 2019. After Nvidia’s terrible results, even that mediocre news was a relief. AMD shares shot up 20%!
FOOD FOR THOUGHT
Home affordability and even availability for people of less means is under pressure in many cities with the most high-tech jobs. A bunch of startups have ideas about addressing shortages, like using cheaper pre-fabricated buildings from Katerra or Blokable. But none of the solutions has made much progress, as Emily Badger explores in a feature for the New York Times. Matt Hoffman, vice president for innovation at the housing nonprofit Enterprise Community Partners, explains:
It now costs as much as $500,000 per unit to build low-income housing in the most expensive markets. Savings in the cost of construction could help developers of such housing stretch subsidies further. Cheaper construction could also change the math in markets where developers say it’s also not profitable to build middle-class housing.
But Mr. Hoffman is skeptical that construction tech can fundamentally change affordability; market-rate developers have no incentive to pass those savings on to renters or home buyers, he said. And he shrugs at 3D-printed houses. “Where am I going to put those houses?” he said, nodding to the policy problems. “How long is it going to take me to find the land, get through the local zoning, the neighborhood planning process?”
IN CASE YOU MISSED IT
What Happens When a Startup Goes Bust By Polina Marinova
Apple Engineer Accused of Stealing Autonomous Car Secrets By Lucas Laursen
iRobot’s Long-Awaited Terra Robot Does the Lawn Mowing for You By Don Reisinger
BEFORE YOU GO
I know I sort of off-handedly referred to Sting in Wednesday’s newsletter by quoting some lyrics from the Police, but how did nobody tell me that they are making another remake movie of Frank Herbert’s classic 1960s sci-fi novel Dune? It appears to be blessedly Sting-free this time around, directed by Dennis Villeneuve and starring Timothée Chalamet as lead character Paul Atreides. And now Zendaya is in talks to play Paul’s love interest, Chani? I’m in.