Facebook results: Company reports huge surge in revenues – mostly from ads

Facebook wants you to think it is a village square, or a drone company who brings internet to the developing world. It’s really just a big billboard.

The company announced shockingly good results this week, with an increase of 15 per cent in active users and advertising revenues up 57 per cent. Those profits stunned many experts, who’d expected it potentially to shrink.

But much of that money came from advertising: of the $5.4 billion it made in the quarter, $5.2 billion came from using people’s data and attention to show them information. Those ads are increasingly being shown to people on mobile, and are helped by a growing number people coming to Facebook from their phones - but they are mostly watching ads, all the same.

In the earnings announcement, Facebook concentrated on the power it was giving to people around the world.

“We had a great start to the year,” said founder and CEO Mark Zuckerberg. “"We're focused on our 10-year roadmap to give everyone in the world the power to share anything they want with anyone.”

But it’s increasingly clear that the power of that sharing comes from advertising. If everyone around the world is given the power to get on the internet and post on Facebook - through its internet-enabled drones or its plans to give people free network connections - then they’ll generate more data and spend more time on Facebook.

Nobody really knows how to make money out of social networks without doing it through advertising. That means that any growth - any exciting features - are probably going to be used to market to users.

But ads aren’t going to be everything. Facebook eventually wants to turn itself from being a place that reminds you to buy things into the place that you actually buy things - largely through the development of robot shopkeepers.

The site already offers a “buy” button on its store, which can be added to ads. That’s meant to allow people to click straight from ads to paying for the thing advertised there - but Facebook has never disclosed the numbers of people using it.

And it once offered two services: Facebook Stores and Facebook Gifts. Both offered the option to buy things from people within Facebook - with the latter allowing people to buy chocolates, wines or gift cards and send them to other friends on the network.

But now it intends to shake that up with robots, allowing people to buy things through chatting rather than in stores.

Last month, the site announced that it would be letting people order things within its chat services. People can head to the Messenger app and chat to their favourite flower or pizza company, for instance,

At the moment, those bots are both buggy and mostly human. Since the artificially intelligent or coded parts of the bots tend not to work properly, the shops are mostly staffed by humans, it seems.

That means that it’s easy to buy simple things through chat. But it offers no obvious improvements to simply navigating to Amazon, or another online store.

And for buying anything more complicated, it tends to hand people over to humans. Which can have the effect of leading you to realise why people took to buying things from computers instead of people in the first place.

Some have suggested that the entire assumption underlying all of Facebook’s ad revenue and future plans might be wrong. An awful lot of people are on Facebook; it doesn’t mean that same huge number of people is going to buy things there.

"There is a natural tendency of investors and media to believe that because your eyeballs are there you will shop there," said Wedbush Securities analyst Michael Pachter. "You watch TV, but when was the last time you interacted with your TV to buy something? When I'm on Facebook I am not shopping and when I am watching TV I am not shopping."