Embattled Facebook's quarterly profit climbs to over $9 billion

Amid fallout from the Facebook Papers documents supporting claims that the social network has valued financial success over user safety, Facebook on Monday reported higher profit for the latest quarter.

The company's latest show of financial strength follows both an avalanche of reports on the Facebook Papers — a vast trove of redacted internal documents obtained by a consortium of news organisations that included The Associated Press — but also of Facebook whistleblower Frances Haugen's testimony to British lawmakers.

Facebook said its net income grew 17 per cent in the July-September period to $9.19 billion, or $3.22 per share, buoyed by strong advertising revenue. That's up from $7.85 billion, or $2.71 per share, a year earlier. Revenue grew 35 per cent to $29.01 billion. Analysts, on average, were expecting earnings of $3.19 per share on revenue of $24.49 billion, according to a poll by FactSet.

Menlo Park, California-based Facebook's stock price climbed $3.90, or 1 per cent, to $332.43 in after-hours trading. It had closed up 1 per cent for the day.

Also read: Facebook will fuel further unrest, whistleblower says

The company predicted uncertainty for 2021 back in January, saying its revenue in the latter half of the year could face significant pressure. Because revenue grew so quickly in the second half of 2020, Facebook said at the time that it could have trouble keeping up that pace. But as the company's stock price shows, investors were not surprised by Monday's results.

Facebook, which is reportedly considering a rebranding — although it has declined to comment on what it called "rumours and speculation" following a report from the tech site The Verge — said it will break out Facebook Reality Labs as a separate segment beginning in the fourth quarter. This segment will include its products on augmented and virtual reality and related hardware, software and content.

Facebook said it had 2.91 billion monthly active users, on average, as of September 30, an increase of 6 per cent from a year earlier. The number of daily active users also grew 6 per cent to 1.93 billion.

For all of 2021, Facebook said it expects revenue in the range of $31.5 billion to $34 billion. That's below the $34.72 billion that analysts are expecting, according to FactSet. The company said its outlook reflects "significant uncertainty" it faces from Apple's iOS 14 changes, as well as Covid-related economic factors. The anti-tracking shield included in iOS 14.5 had zapped smaller rival Snap's profit earlier this month.

Haugen told a British parliamentary committee Monday that the social media giant stokes online hate and extremism, fails to protect children from harmful content and lacks any incentive to fix the problems, providing momentum for efforts by European governments working on stricter regulation of tech companies.

While her testimony echoed much of what she told the US Senate this month, her in-person appearance drew intense interest from a British parliamentary committee that is much further along in drawing up legislation to rein in the power of social media companies.

Haugen told the committee of United Kingdom lawmakers that Facebook Groups amplifies online hate, saying algorithms that prioritise engagement take people with mainstream interests and push them to the extremes. The former Facebook data scientist said the company could add moderators to prevent groups over a certain size from being used to spread extremist views.

"Unquestionably, it's making hate worse," she said.

Haugen said she was "shocked to hear recently that Facebook wants to double down on the metaverse and that they're gonna hire 10,000 engineers in Europe to work on the metaverse," Haugen said, referring to the company's plans for an immersive online world it believes will be the next big internet trend.

"I was like, Wow, do you know what we could have done with safety if we had 10,000 more engineers?" she said.

Facebook says it wants regulation for tech companies and was glad the UK was leading the way.

"While we have rules against harmful content and publish regular transparency reports, we agree we need regulation for the whole industry so that businesses like ours aren't making these decisions on our own," Facebook said Monday.

It pointed to investing $13 billion (9.4 billion pounds) on safety and security since 2016 and asserted that it's "almost halved" the amount of hate speech over the last three quarters.

Haugen accused Facebook-owned Instagram of failing to keep children under 13 — the minimum user age — from opening accounts, saying it wasn't doing enough to protect kids from content that, for example, makes them feel bad about their bodies.

"Facebook's own research describes it as an addict's narrative. Kids say, This makes me unhappy, I feel like I don't have the ability to control my usage of it, and I feel like if I left, I'd be ostracised," she said.

The company last month delayed plans for a kids' version of Instagram, geared toward those under 13, to address concerns about the vulnerability of younger users. Haugen said she worried it may not be possible to make Instagram safe for a 14-year-old and that "I sincerely doubt it's possible to make it safe for a 10-year-old."

She also said Facebook's moderation systems are worse at catching content in languages other than English, and that's a problem even in the UK because it's a diverse country.