uploads///FB REV COST OF REV

Assessing Facebook’s Ad Revenue, Costs, and Data Breach Scandals

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Oct. 2 2018, Updated 10:20 a.m. ET

How much did FB’s ad revenue grow?

Facebook’s (FB) revenue rose at a three-year CAGR (compound annual growth rate) of 48% to $40.7 billion in 2017. Its revenue growth increased from 44% in 2015 to 47% in 2017. Its share of advertising revenue increased from 92% in 2014 to 98% in 2017. Its advertising revenues amounted to $11.5 billion and $39.9 billion in 2014 and 2017, respectively.

Facebook’s revenue improved 45% to $25.2 billion in the six months that ended on June 30. Its ad revenue totaled $24.8 billion.
FB REV COST OF REV

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What drove costs?

According to Reuters, Facebook paid between $10,000 and $35,000 to content creators for shorter-form shows and up to $250,000 for longer shows. Facebook intends to spend $2 billion on the production of original content for Facebook Watch.

Facebook’s cost of revenue grew at a three-year CAGR of 36% to $5.5 billion in 2017. Its cost of revenue rose from 33% in 2015 to 44% in 2017. However, its cost margin contracted from 17% in 2014 to 13% in 2017. Its costs climbed 73% to $4.1 billion in the six months that ended on June 30. Its costs made up 14% of its revenue in the six months that ended on June 30, 2017, compared to 16% in the six months that ended on June 30, 2018.

Facebook’s share of the data breach scandals

Facebook announced a security breach of 50 million users’ accounts on September 28. However, it assured users that the issue had been fixed. 

Facebook, Alphabet (GOOG), and Twitter (TWTR) came under scrutiny in early 2018 over alleged data-sharing policies. Facebook had to pay a fine of $1.9 billion after 87 million user accounts were compromised in relation to the Cambridge Analytica data-mining scandal. Such scandals have been detrimental to the health of Facebook, which has 2.2 billion monthly active users.

Next, we’ll analyze Facebook’s content-streaming platform, Facebook Watch.

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