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Facebook shares rise on strong Q3, users up 2% to 2.45B – TechCrunch

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Despite ongoing public relations crises, Facebook kept growing in Q3 2019, demonstrating that media backlash does not necessarily equate to poor business performance.

Facebook reached 2.45 billion monthly users, up 1.65%, from 2.41 billion in Q2 2019 when it grew 1.6%, and it now has 1.62 billion daily active users, up 2% from 1.587 billion last quarter when it grew 1.6%. Facebook scored $17.652 billion of revenue, up 29% year-over-year, with $2.12 in earnings per share.

Facebook’s earnings beat expectations compared to Refinitiv’s consensus estimates of $17.37 billion in revenue and $1.91 earnings per share. Facebook’s quarter was mixed compared to Bloomberg’s consensus estimate of $2.28 EPS. Facebook earned $6 billion in profit after only racking up $2.6 billion last quarter due to its SEC settlement.

Facebook shares rose 5.18% in after-hours trading, to $198.01 after earnings were announced, following a day where it closed down 0.56% at $188.25.

Notably, Facebook gained 2 million users in each of its core U.S. & Canada and Europe markets that drive its business, after quarters of shrinkage, no growth or weak growth there in the past two years. Average revenue per user grew healthily across all markets, boding well for Facebook’s ability to monetize the developing world where the bulk of user growth currently comes from.

Facebook says 2.2 billion users access Facebook, Instagram, WhatsApp or Messenger every day, and 2.8 billion use one of this family of apps each month. That’s up from 2.1 billion and 2.7 billion last quarter. Facebook has managed to stay sticky even as it faces increased competition from a revived Snapchat, and more recently TikTok. However, those rivals might more heavily weigh on Instagram, for which Facebook doesn’t routinely disclose user stats.

Facebook ARPU Q3 2019

Zuckerberg defends political ads policy

Facebook’s earnings announcement was somewhat overshadowed by Twitter CEO Jack Dorsey announcing it would ban all political ads — something TechCrunch previously recommended social networks do. That move flies in the face of Facebook CEO Mark Zuckerberg’s staunch support for allowing politicians to spread misinformation without fact-checks via Facebook ads. This should put additional pressure on Facebook to rethink its policy.

Zuckerberg doubled-down on the policy, saying “I believe that the better approach is to work to increase transparency. Ads on Facebook are already more transparent than anywhere else,” he said. Attempting to dispel that the policy is driven by greed, he noted Facebook expects political ads to make up “less than 0.5% of our revenue next year.” Because people will disagree and the issue will keep coming up, Zuckerberg admitted it’s going to be “a very tough year.”

Facebook also announced that lead independent board member Susan D. Desmond-Hellmann has resigned to focus on health issues.

Earnings call highlights

Facebook expects revenue deceleration to be pronounced in Q4. But CFO David Wehner provided some hope, saying “we would expect our revenue growth deceleration in 2020 versus the Q4 rate to be much less pronounced.” That led Facebook’s share price to spike from around $191 to around $198.

However, Facebook will maintain its aggressive hiring to moderate content. While the company has touted how artificial intelligence would increasingly help, Zuckerberg said that hiring would continue because “There’s just so much content. We do need a lot of people.”

Zuckerberg Libra 1

Regarding Libra’s regulatory pushback, Zuckerberg explained that Facebook was already diversified in commerce if that doesn’t work out, citing WhatsApp Payments, Facebook Marketplace and Instagram shopping.

On anti-trust concerns, Zuckerberg reminded analysts that Instagram’s success wasn’t assured when Facebook acquired it, and it has survived a lot of competition thanks to Facebook’s contributions. In a new talking point we’re likely to hear more of, Zuckerberg noted that other competitors had used their success in one vertical to push others, saying “Apple and Google built cameras and private photo sharing and photo management directly into their operating systems.”

Scandals continue, but so does growth

Overall, it was another rough quarter for Facebook’s public perception as it dealt with outages and struggled to get buy-in from regulators for its Libra cryptocurrency project. Former co-founder Chris Hughes (who I’ll be leading a talk with at SXSW) campaigned for the social network to be broken up — a position echoed by Elizabeth Warren and other presidential candidates.

The company did spin up some new revenue sources, including taking a 30% cut of fan patronage subscriptions to content creators. It’s also trying to sell video subscriptions for publishers, and it upped the price of its Workplace collaboration suite. But gains were likely offset as the company continued to rapidly hire to address abusive content on its platform, which saw headcount grow 28% year-over-year, to 43,000. There are still problems with how it treats content moderators, and Facebook has had to repeatedly remove coordinated misinformation campaigns from abroad. Appearing concerned about its waning brand, Facebook moved to add “from Facebook” to the names of Instagram and WhatsApp.

It escaped with just a $5 billion fine as part of its FTC settlement that some consider a slap on the wrist, especially since it won’t have to significantly alter its business model. But the company will have to continue to invest and divert product resources to meet its new privacy, security and transparency requirements. These could slow its response to a growing threat: Chinese tech giant ByteDance’s TikTok.



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Chinese mobile games are gaining ground in the US – TechCrunch

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Over the past year, the coronavirus crisis has spurred app usage in the United States as people stay indoors to limit contact with others. Mobile games particularly have enjoyed a boom, and among them, games from Chinese studios are gaining popularity.

Games released on the U.S. App Store and Google Play Store raked in a total of $5.8 billion in revenue during the fourth quarter, jumping 34.3% from a year before and accounting for over a quarter of the world’s mobile gaming revenues, according to a new report from market research firm Sensor Tower.

In the quarter, Chinese titles contributed as much as 20% of the mobile gaming revenues in the U.S. That effectively made China the largest importer of mobile games in the U.S., thanks to a few blockbuster titles. Chinese publishers claimed 21 spots among the 100 top-grossing games in the period and collectively generated $780 million in revenues in the U.S., the world’s largest mobile gaming market, more than triple the amount from two years before.

Occupying the top rank are familiar Chinese titles such as the first-person shooter game Call of Duty, a collaboration between Tencent and Activision, as well as Tencent’s PlayerUnknown’s Battlegrounds. But smaller Chinese studios are also quickly infiltrating the U.S. market.

Mihoyo, a little-known studio outside China, has been turning heads in the domestic gaming industry with its hit game Genshin Impact, a role-playing action game featuring anime-style characters. It was the sixth-most highest-grossing mobile game in the U.S. during Q4, racking up over $100 million in revenues in the period.

Most notable is that Mihoyo has been an independent studio since its inception in 2011. Unlike many gaming startups that covet fundings from industry titans like Tencent, Mihoyo has so far raised only a modest amount from its early days. It also stirred up controversy for skipping major distributors like Tencent and phone vendors Huawei and Xiaomi, releasing Genshin Impact on Bilibili, a popular video site amongst Chinese youngsters, and games downloading platform Taptap.

Magic Tavern, the developer behind the puzzle game Project Makeover, one of the most installed mobile games in the U.S. since late last year, is another lesser-known studio. Founded by a team of Tsinghua graduates with offices around the world, Magic Tavern is celebrated as one of the first studios with roots in China to have gained ground in the American casual gaming market. KKR-backed gaming company AppLovin is a strategic investor in Magic Tavern.

Other popular games in the U.S. also have links to China, if not directly owned by a Chinese company. Shortcut Run and Roof Nails are works from the French casual game maker Voodoo, which received a minority investment from Tencent last year. Tencent is also a strategic investor in Roblox, the gaming platform oriented to young gamers and slated for an IPO in the coming weeks.

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RecargaPay closes a $70 million Series C – TechCrunch

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RecargaPay, a Brazil-based fintech that allows users to top off their prepaid cell phones online, announced this morning that they’ve closed their $70 million Series C. The company, which operates solely in Brazil, was launched in 2010 by Miami-based serial entrepreneur Rodrigo Teijeiro, who is co-founder and CEO. 

Unlike in the U.S. where most people have a cell phone plan through a major carrier, in Brazil — a country where the minimum wage is currently $1,100 reals per month (roughly $202 USD) — many people must buy calling cards at local shops to add credit to their phones, which allows them to avoid a monthly recurring bill.

“Most people were using prepaid [phones] for control because they didn’t trust the telephone companies — they didn’t want roaming fees or fees for going over etc.,” said Teijeiro. Many of us can relate to the days when we’d come home from an international trip and have an astronomical phone bill because of roaming fees, but imagine if that were a monthly occurrence?

In 2014, Teijeiro and his co-founders — one of whom is his brother, Alvaro, the CTO — turned the RecargaPay website into an app.

“Before RecargaPay, if your cell phone ran out of credits and it was 10 p.m. and you needed to make a phone call, you’d have to go out and find a shop that sold the prepaid cards to add the credits to your phone — it was super inconvenient,” Teijeiro added. Cell phones caught on quickly in Brazil because it has traditionally been difficult to obtain a landline — an ordeal that often took several months to solidify.

RecargaPay originally had operations in various Latin American countries, such as Argentina, Chile, Colombia, Mexico, Peru and Brazil, as well as in Spain and the U.S. But in 2016 the company decided to focus on the Brazilian market, because not only is it the biggest in LatAm, but it also has the highest penetration of credit cards. 

“The number one mistake investors make when investing in LatAm is that they think that LatAm is one whole market. But especially in fintech, all the regulations are very different. That’s why it’s hard to scale in LatAm,” he said.

The company makes money by charging a monthly fee of $19.99 reals. When a customer makes an online top-off on the app, they get 4% cash back because the cell phone carriers pay RecargaPay the equivalent amount, which it then passes on to the user.

The company, which is EBITDA positive according to Teijeiro, has raised just over $100 million in capital to date and plans to use the $70 million to “expand its financial services offerings to small businesses and consumers, including further development of its popular subscription program Prime+,” the company said in a statement.

Already, RecargaPay offers much more than the ability to top off your cell phone. Other features include the ability to buy gift cards, apply for and receive microloans, refill your public transportation cards and pay bills. Teijeiro explained that RecargaPay and Nubank, LatAm’s largest digital bank, are not direct competitors, but rather operate in the same ecosystem. A lot of Nubank customers who now have a credit card, thanks to the bank’s no-fee cards, can use RecargaPay to top off their cell phones, he added.

According to a 2020 report by TechnoBlog, a Brazilian media outlet, in 2010 about 83% of cell phones in Brazil were prepaid. Today, that number is smaller, but it’s still a whopping 49%. The change started in 2012 with the advent of smartphones in Brazil and the popularization of WhatsApp. While this may sound insane, previously, Brazilians could only call others who used their same cell phone carrier — if they called people in other networks they’d incur a hefty fee.

To get around this problem, Brazilians bought multiple cell phone chips from different carriers and they would have to top off these chips individually. You’d also have to remember which of your contacts used which carrier — mind-blowing, I know. So when WhatsApp launched, it eliminated that problem altogether, hence its massive penetration in the Brazilian market.

(l-r) Renato Camargo: country manager & CMO; Alvaro Teijeiro: co-founder & CTO; Gustavo Victorica: co-founder & COO; Rodrigo Teijeiro: founder & CEO; Diego Escobar: CFO. Image Credits: RecargaPay

RecargaPay’s Series C was co-led by Miami-based Fuel Ventures and Madrid-based IDC Ventures, with additional participation from LUN Partners, Experian Ventures and ATW Partners.

“RecargaPay is a pioneer in the payments sector as one of the first all-in-one platforms to serve such a wide array of everyday needs of Brazilians,” said Maggie Vo, Fuel Venture Capital managing general partner and chief investment officer. “We are thrilled to back a company that is actively improving the lives of so many people by giving them more control over their finances, all the while challenging the status quo of banking systems.”

“Often people think that RecargaPay is for the unbanked, but it’s actually for the unbanked and the banked,” Teijeiro added. “What we always had in mind was to build — in the long-term — a mobile money ecosystem. Our approach was to solve problems one-by-one, and now we have a vertically integrated payment platform that offers financial services.”

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BigCommerce customers can now sell on Walmart’s online marketplace – TechCrunch

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BigCommerce has partnered with Walmart to allow its customers to sell on the Bentonville, Arkansas-based retailer’s ecommerce marketplace, it announced this morning. Shares of Austin-based BigCommerce rose sharply in pre-market trading after the news, gaining around 10% before the bell.

Walmart, best-known for in-person shopping, has proven an ecommerce success story in recent years. For example, in its most recent quarter while Walmart as a whole grew 7.3%, its ecommerce sales advanced 69%.

BigCommerce has also reported strong growth in recent quarters, supported in part by partnerships similar to the one that it announced today. The ecommerce SaaS provider rolled out an integration with Wish last year, for example.

In a call concerning its earnings, which were announced before the Walmart news was announced, BigCommerce CEO Brent Bellm told TechCrunch that his company had been impressed with customer uptake of the Wish integration. Regarding the Walmart partnership, in a second interview Bellm told TechCrunch that it was overdue on the BigCommerce side; given the historical success of the Wish deal, it will be curious to dig into how many of the ecommerce platform’s customers opt to sell on Walmart, and how quickly they do so.

TechCrunch also spoke with Walmart exec Jeff Clementz about the arrangement. He stressed Walmart’s online customer monthly-actives — 120 million, per his company — and the breadth of their demand; BigCommerce customers selling on Walmart could expand its product diversity, helping the traditionally physical retailer possible continue its rapid growth.

The two companies are incentivizing adoption of the deal amongst BigCommerce customers by waiving certain fees for a month for retailers that sign up to sell on Walmart; Clementz described it as the first time that his company had offered a “new-seller discount.”

TechCrunch has had its eye on BigCommerce for some quarters now, thanks in part to its 2020 IPO. But the company is also interesting as its regular earnings results provide a lens into the world of ecommerce growth amongst independent digital retailers. Shopify, a chief BigCommerce rival, provides a similar view into the ecommerce world.

Shopify previously integrated with Walmart in the middle of 2020.

Looking ahead, it will be interesting to see if the Walmart partnership helps BigCommerce continue its improving revenue growth. The company is in a marketshare race with Shopify. But while BigCommerce’s rival has posted impressive growth from its integrated solutions, like its payments service, the Austin-based company stresses what it calls a more open model. Shopify charges many customers a percentage of their transaction volume for using a third-party payment solution over its own, for example, which Bellm described as a “tax” during an interview.

“Merchant Solutions” revenue at Shopify, which it generates “principally” from “payment processing fees from Shopify Payments,” grew 116% in 2020 to a little over $2 billion.

So with BigCommerce collecting a partnership with Walmart to match Shopify’s own, we’re seeing not merely two ecommerce platforms go toe-to-toe on providing their customers with as much market access as they can, but two different business philosophies compete. Akin to Microsoft Teams and Slack, it’s a competition to spectate.

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