'Hard' year for Facebook as profits surge 56% but changes dent usage

Facebook (NasdaqGS: FB - news) founder Mark Zuckerberg said it had been a "hard" year for the social media giant despite a surge in annual profits as he revealed the negative impact of recent changes.

Shares (Berlin: DI6.BE - news) in the company fell 5% in after-hours trading as Mr Zuckerberg disclosed that the shake-up had cut the amount of time spent on the site by 50m hours a day.

Full-year profits rose 56% to $15.9bn and revenues climbed 47% to $40.7bn while fourth quarter revenues and underlying earnings beat analysts' expectations.

But a 14% rise in the number of daily active users to 1.4 billion in December compared to a year before fell slightly short of Wall Street expectations.

Mr Zuckerberg said: "2017 was a strong year for Facebook, but it was also a hard one."

Facebook had warned earlier this month that tweaks to its news feed feature would result in a hit to user engagement and it has also been affected by changes to the way it shows videos.

Mr Zuckerberg said: "Last quarter, we made changes to show fewer viral videos to make sure people's time is well spent.

"In total, we made changes that reduced time spent on Facebook by roughly 50m hours every day."

Facebook's boss argues that it is "encouraging meaningful connections between people rather than passive consumption of content" and that by doing so it will be stronger in the long term.

The changes will also see it highlight "trustworthy" news in its news feed following claims that Russians and others spread false reports on the site, particularly during the 2016 presidential election.

Elsewhere in the US tech sector on Wednesday, Microsoft (Euronext: MSF.NX - news) reported better than expected second quarter underlying profit and revenue figures, thanks to demand for its cloud computing services.

But it took a $13.8bn one-off charge relating to Donald Trump's tax reforms that resulted in it reporting a loss of $6.3bn for the three months to the end of December.

Facebook has also recognised a $2.3bn charge related to the tax laws but that was not enough to stop its profits from rising.