Facebook CFO Announcement Sets Off Roller Coaster Reaction

David Ebersman, Facebook’s CFO

Facebook shares soared on Wednesday, October 30th, by 15 percent. Better than expected quarterly growth boosted the social media giant’s standing – but only temporarily. In an earnings call focused mostly on mobile ad revue, chief financial officer David Ebersman revealed that usage among younger teens has dropped, setting off a shaky market reaction.

While Facebook remains the king of social media, newer apps like Instagram, Vine, and Snap Chat have eroded Facebook’s hold on young teens. According to CFO Ebersman, while almost every teen has a Facebook account, only 25 percent of them use it on a regular basis. The daily engagement has rapidly dropped amongst the young teen audience within the last year.

After its 15 percent stock soar, Facebook shares were on much shakier ground, though the numbers stabilized by mid-Thursday afternoon. Some interesting bits from Facebook’s report include:

  • Steady ad-to-stories ratio. Facebook has no immediate plans to change its advertising algorithm on the newsfeed, assuring investors that the ad-to-stories ratio will generally remain the same. Currently, approximately one ad per twenty stories is shown.
  • Mobile is monetized. For a little over a year, there was much concern over how Facebook would monetize its growing mobile market. It seems that the concern has been answered, as mobile ads alone brought in $880 million in the third quarter.
  • Revenue is up across the board. The report shows that Facebook has experienced a 60 percent increase in revenue, due mostly to its mobile business.

Still, despite the overwhelming good news, the fact that young teens are losing interest in Facebook has investors concerned. But just as CFO David Ebersman noted, the “trend” is considerably marked “of questionable statistical significance.” He even goes on to say that this is “awkward news” because it marred what would have otherwise been a healthy earnings report.

Despite the losses, Forbes asks an important question: does the drop actually matter? Facebook CFO Ebersman doesn’t seem too concerned about the drop and neither does Mark Zuckerberg, for that matter. Here, we have another case of a CFO having to tip-toe around shaky topics to avoid setting off negative media-hype that could create unwarranted damage.