Is Stagnant Daily User Growth Reason for Concern at Facebook?

Facebook Inc. (NASDAQ:FB) shares were up 4.27% at the bottom of the noon hour on February 1. The stock has increased 10.5% in 2018 thus far. Facebook released its 2017 fourth quarter and full-year results on January 31.

Advertising revenue hit $12.77 billion in the fourth quarter in comparison to $8.6 billion in the prior year. Advertising revenue for the year end was $39.9 billion compared to $26.8 billion in 2016. Net income reached $4.2 billion in the fourth quarter over $3.5 billion in the prior year, and for the full-year net income was $15.9 billion compared to $10.2 billion in 2016.

Facebook reported 1.4 billion daily active users in 2017, up 2.18%, which represented the lowest daily user growth ever reported quarter over quarter. The company has made some significant changes to its platform in reaction to the campaign against so-called “Russian meddling” following the 2016 U.S. election. CEO Mark Zuckerberg was initially skeptical of such influence, but has done an about-face and vowed to combat any future “interference”.

Facebook will also employ more moderators in the future, as the company told U.S. representatives that it planned to double its staff in these areas. Some of these changes included showing less viral videos which has reduce the time spent on Facebook by regular users. These changes were felt most strongly in the United States and Canada, which combined experienced a decline of 700,000 daily users.

In spite of the stagnation in daily users, Facebook continues to display impressive growth in its advertising revenue. It remains an attractive long-term hold.