Facebook is changing the way it reports user numbers to draw more attention to Instagram and WhatsApp growth

Key Points
  • Facebook said on its earnings call Wednesday it would eventually move to reporting aggregate metrics across its "Family" of apps, including Instagram and WhatsApp, rather than reporting individual Facebook community metrics.
  • Analysts overall were very pleased with Facebook's earnings and revenue beat, but a few expressed concern over the plans to move away from reporting Facebook's community metrics.
  • Apple saw backlash initially when, trying to shift investors' focus from the iPhone to services revenue, it announced it would no longer break out iPhone unit sales.
Adam Mosseri (center), is taking over leadership of Facebook's instagram from co-founders Mike Krieger (left) and Kevin Systrom (right). 
Via Instagram

Facebook told investors Wednesday it will eventually stop breaking out numbers for its namesake platform and instead report metrics for its "Family" of services.

"For the time being, we will continue to disclose both set of numbers," Chief Financial Officer David Wehner said on a call with investors following the company's fourth-quarter 2018 earnings report. "But over time, we expect Family metrics will play the primary role in how we talk about our company and we will eventually phase out Facebook-only community metrics."

Investors largely seemed unswayed by the news as Facebook stock soared nearly 11 percent Thursday on its strong earnings beat. Analysts were overall very pleased with Facebook's latest report, which beat Street estimates on revenue, earnings per share and average revenue per user, or ARPU, while maintaining modest user growth. But some expressed concern about Facebook's plans to aggregate its user numbers across services.

"We are not supportive of this move as these figures will be primarily driven by the lower-monetising [sic] messaging apps," Atlantic Equities wrote in a note published Thursday morning. "But we can see the rationale, particularly given the growing importance of Instagram." The firm issues an overweight rating with a price target of $200.

MKM Partners rated the stock a buy with a $190 price target, but noted, "Bears may highlight commentary that [management] intends to de-emphasize Facebook app metrics and focus on the family of apps, eventually removing the existing user disclosure. Bears will likely suggest that [management] is preparing to remove transparency as an engagement problem on the core service is set to worsen."

Apple made a similar announcement in an earnings call last year when it said the company would no longer break out iPhone unit sales, which has long been a key metric for investors. Many analysts saw the disclosure as acknowledgment of weak iPhone sales, though strong services revenue this quarter seems to have persuaded investors so far that Apple is strong in other parts of its business.

Both Facebook and Apple have justified the reporting shift by saying there are other, more important metrics investors should focus on in their businesses. Apple is trying to unpin its fate from iPhone sales and instead guide the conversation toward services, which offer the potential of more consistent, recurring revenue. Facebook hopes its other brands, such as Instagram and WhatsApp, can buoy its business.

Facebook is also in the early planning stages of integrating the messaging platforms across those three services with default encryption, the company confirmed after The New York Times first reported the initiative. While the plans raised privacy and antitrust concerns, they also could offer the potential to better monetize those services.

Some analysts seem to agree with Facebook's mindset shift to focus on its full suite of apps. Even before Facebook's earnings report Wednesday, Raymond James & Associates published a note that said, "We believe Family [Daily Active Users] are becoming more important given growth of Instagram."

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