Facebook Australia full-year profit slips slightly as revenue receives 33% boost

The Australian arm of the social media giant paid AU$16.8 million in income tax during FY19.

Facebook Australia has reported after-tax profit of AU$22.7 million for the 2019 financial year, slightly down from last year's AU$23.3 million.

For the year ending 31 December 2019, the Australian arm of the social media giant recorded AU$16.8 million as an income tax expense, up from the AU$11.7 million paid last year, off the back of before-tax profit of AU$39.5 million.

The AU$16.8 million figure comprised of a AU$13 million in current-year tax, adjustments of AU$2.3 million for years prior, and another AU$1.41 million due to decreases in deferred tax benefits.

Revenue came in at AU$167 million, a 33% boost from AU$125 million from the prior year. Of that, a majority was due to the AU$166 million collected by the company from online advertising sales. The remaining revenue came from services, which amounted to just over AU$1 million.

The Australian outfit described itself as a reseller of advertising services to local customers, and from that activity, it took in AU$709 million from customers, a AU$111 million increase on last year. Under the line of payments to suppliers and employees, its outflows totalled AU$665 million, an increase of AU$116 million on last year.

Facebook Australia reported having 139 employees in FY19, an increase from the 123 employees during the last financial year. In turn, employee wages increased from AU$44 million to AU$55 million during the 2019 financial year.

One other notable expense during the year for Facebook Australia was for marketing and sales, which more than doubled from the AU$13.4 million recorded the previous year to AU$28.4 million during FY19.

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The immediate parent entity of Facebook Australia is Facebook Global Holdings and the ultimate parent company is Facebook Inc, both of which are based in the United States.

Facebook Australia also took the opportunity to acknowledge that while the coronavirus pandemic occurred after the FY19 financial reporting period, the company has managed to continue to operate "with limited disruption and has remained engaged in performing its principal activities" to date.

It added "it is difficult to quantify the financial impact of the evolving situation … [and] will continue to monitor and assess" but does not expect "a material adverse impact on its ability to continue as a going concern".

Last week, Facebook, the parent company,  published its first quarter results of 2020 last week, and indicated the coronavirus pandemic resulted in "significant reduction in the demand for advertising" in the last three weeks of the quarter.

Nevertheless, Facebook still managed to achieve 18% year-on-year revenue growth to $17.74 billion and said it saw  "signs of stability reflected in the first three weeks of April".

Facebook's Q1 net income came to $4.9 billion.

Facebook had warned in March that the COVID-19 pandemic had been adversely affecting its ad business, even as it spurred increased user engagement on Facebook products.

See also: Frydenberg says Canberra will not bow to threats from Google and Facebook  

In addition to these global challenges, the Australian government is hoping to make tech giants such as Facebook and Google pay for Australian content if it is a source of profit.

Leading the charge on this is the Australian Competition and Consumer Commission (ACCC) with the development of a mandatory code of conduct to address "bargaining power imbalances" between news media businesses and digital platforms.

The ACCC published a paper last month currently seeking feedback on how best to address the imbalance in bargaining position between news media and particular digital platforms, posing 59 consultation questions.

Thirteen of those questions relate to the different types of collective bargaining frameworks.

The move forms part of the government's response to the ACCC's Digital Platforms Inquiry, which last July made a total of 23 recommendations that covered competition, consumer protection, privacy, and media regulatory reform.

Submissions close 5 June 2020 and a final code is expected to be settled "soon thereafter".

The social media giant is also facing a lawsuit that was lodged by Australian Information and Privacy commissioner Angelene Falk, after it was revealed in early 2018 that over 311,000 Australians were caught up in the improper use of Facebook data by Cambridge Analytica.

The commissioner is alleging Facebook committed serious and/or repeated interferences with privacy, in contravention of the Privacy Act 1988

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