Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Facebook: Fair Disclosure or Too Much Information?

By

Facebook reported excellent third-quarter earnings, but two management revelations spoiled the bulls' party.

PrintPRINT
Don't tell me 'cause it hurts
--"Don't Speak" (No Doubt)

Maybe Facebook (NASDAQ:FB) is a little too honest for its own good.

Yesterday, the company delivered truly outstanding third-quarter results:
  • Revenues rose 60% year-over-year to $2.02 billion, easily beating the $1.91 billion consensus.
  • Earnings came in at $0.25 per share, $0.06 ahead of consensus.
  • Mobile accounted for 49% of ad revenues, up from 41% last quarter.
  • Non-GAAP operating margin hit 49%, up from 42%.
It was all quite magical, and the stock quickly shot up to $57.98, an 18% gain from yesterday's close.

But on the conference call, Facebook CFO David Ebersman made a revelation that killed the bulls' party:

I want to say a few words about youth engagement on Facebook. As we've said previously, this is a hard issue for us to measure because self-reported age data is unreliable for younger users. So we've developed other analytical methods to help us estimate usage by age. Our best analysis on youth engagement in the US reveals that usage of Facebook among US teens overall was stable from Q2 to Q3. But we did see a decrease in daily users specifically among younger teens. We won't typically call out such granular data especially when it's of questionable statistical significance given the lack of precision of our age estimates for younger users. But we wanted to share this with you now since we get a lot of questions about teens.

So now, investors are freaked out about the idea of younger teens leaving Facebook -- even though the company saw a significant increase in the user count. Daily Active Users were up 25% year-over-year!

Is There Such a Thing as Too Much Information From a Public Company?

More information is usually a good thing.

One reason I enjoy writing about Apple (NASDAQ;AAPL) so much is that the company provides a wealth of information regarding sales, which makes it easy to analyze individual product lines like the iPhone and iPad. I can't think of another consumer technology company that provides as much detail. With too many companies, we're often reduced to trying to make sense of words like "strong" and "impressive" instead of an actual data set.

In this case, Facebook reported a very narrow piece of data -- a subset of the teen category -- that it described as "of questionable statistical significance." It wasn't remotely as cut-and-dry as a piece of financial data.

The big question is this: Is Facebook setting the expectation that it will make similar revelations in the future, even if the numbers aren't statistically significant?

< Previous
Position in FB,AAPL
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
PrintPRINT

Busy? Subscribe to our free newsletter!

Submit
 

WHAT'S POPULAR IN THE VILLE