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Facebook Posts Rare Drop in Active US Users But Beats Revenue Projections in Q3

Ad spend boosts Facebook’s bottom line despite declining users in U.S. and Canada

Facebook beat third-quarter earnings estimates and continued to grow its revenue, bolstered mostly by ad sales in its fiscal third quarter.

The company’s total revenue in its third quarter was $21.5 billion, up 22% from the year prior. Ad sales increased to $21.2 billion, up from $17.4 billion the same time last year.

The social media giant’s total monthly active user count was 2.7 billion, and its daily active users numbered 1.8 billion. A decline in users in the U.S. and Canada was noted this quarter and Facebook said it expects that trend to continue going into the fourth quarter. Going into the third quarter, Facebook had 256 million daily active users across the U.S. and Canada.

“As expected, in the third quarter of 2020, we saw Facebook DAUs and MAUs in the US & Canada decline slightly from the second quarter 2020 levels which were elevated due to the impact of the COVID-19 pandemic,” Facebook stated. “In the fourth quarter of 2020, we expect this trend to continue and that the number of DAUs and MAUs in the US & Canada will be flat or slightly down compared to the third quarter of 2020.”

Facebook was the target of an ambitious #StopHateForProfit campaign in June and July. Spearheaded by civil rights leaders, the effort was a boycott of Facebook and its subsidiary Instagram in protest of its content moderation policies. The effort clearly didn’t have any negative effect on Facebook’s fiscal bottom line in the third quarter.

Facebook’s overall net income was $7.8 billion, up roughly 30% compared to third quarter 2019.

“We had a strong quarter as people and businesses continue to rely on our services to stay connected and create economic opportunity during these tough times,” CEO Mark Zuckerberg said in a statement. “We continue to make significant investments in our products and hiring in order to deliver new and meaningful experiences for our community around the world.”

It was a busy three months, even by Facebook’s usual standards. The company has doubled down on its content moderation efforts recently, with Facebook removing millions of posts for spreading COVID-19 misinformation in early August. The company also started to crack down on QAnon content, before later deciding to ban it outright. And earlier this month, Facebook said it would purge any content that denies the Holocaust — a step that came after Zuckerberg said his own feelings on the matter had “evolved.” Previously, Zuckerberg had said he wants to take a laisse-faire approach to moderating hate speech on the platform.

But perhaps its biggest emphasis has been placed on next week’s presidential election. Facebook, along with Twitter, were heavily criticized after the 2016 U.S. election, with many saying the companies didn’t do enough to weed out Russian trolls and other forms of political disinformation. Since then, both companies have beefed up their moderation teams and added new rules. Facebook added to that foundation recently, announcing it will block political ads for one week after polling closes on Election Day, in an effort to prevent politicians from claiming an early victory. The company also looked to help more Americans register to vote this year through its “voting information center,” which launched in August.

In recent weeks, Facebook’s moderation policies have brought more scrutiny on the company. In particular, the decision to reduce the New York Post’s report on Hunter Biden, son of Democratic nominee Joe Biden, in users’ Newsfeeds earlier this month was met with cries of tech censorship. (Twitter went a step further, saying users weren’t even allowed to share the report.) Soon after, FCC Chairman Ajit Pai said the commission would be reviewing Section 230 of the Communications Decency Act, which offers tech companies a broad legal shield to moderate content as they see fit. If this law were to be changed, it could have a major impact on Facebook’s business.

Facebook said it expects its year-over-year ad revenue growth to be higher than its third-quarter rate as advertiser demand ramps up during the holiday season. Online commerce, which has grown exponentially during the pandemic, is expected to further fuel ad demand in 2021.

The company did say it expects a “significant amount of uncertainty” in 2021, including in the European Union, where privacy regulations are increasingly clamping down on Facebook’s data collecting (and sharing) policies. ”

There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress,” Facebook noted in its statement.