Ad sales lift boosts Facebook earnings in Australia

Social media giant Facebook scooped up nearly $674m from the local advertising market over the past year.

Facebook sold $674m worth of ads in Australia in 2019. Picture: AFP

Social media giant Facebook scooped up nearly $674m from the local advertising market over the past year, delivering double-digit sales growth as it sold display ads over the Facebook, Instagram and Messenger platforms.

The 16 per cent increase in ad sales helped Facebook boost its Australian operating earnings over the past year to $39.5m, which was up $4.4m on a year earlier, accounts filed with the corporate regulator show.

However, a slightly higher tax bill meant Facebook’s bottom line profit fell slightly to $22.7m for the 2019 calendar year, compared with $23.3m a year earlier.

Facebook and other technology majors, including Google and Apple, have come under pressure from authorities worldwide for their efforts to shift tax obligations to lower-tax countries.

For its part, Facebook paid $16.8m in income tax, up from $11.8m for the same time a year earlier, mostly on a higher operating profit and a $2.3m “adjustment” for tax in previous periods.

Recent accounts filed by Google in Australia show the search major was hit last year with a $50.6m charge for “prior period current tax”.

Facebook, which employs 139 people in Australia, sells the bulk of ads under a service agreement with another related Facebook entity. Last calendar year Facebook sold $673.9m in gross advertising in Australia, up from $579.6m a year earlier. It bought $507.9m of advertising inventory from another related entity.

“The company acts as a reseller of advertising services to designated Australia customers through a reseller agreement with another group company and generates revenues primarily through resale of advertising inventory on Facebook,” Facebook notes in its account.

Advertiser reseller revenue is made up of revenue from the display of impression-based ads in the contracted period in which the impressions are delivered. “Impressions are considered delivered when an ad is displayed to a user,” Facebook notes in its ­accounts.

Apart from selling advertising, Facebook noted that over the past year its operations in Australia had expanded to provide “contract research and development services for another related corporation”. But it was not specific.

With the onset of COVID-19, Facebook said in its accounts it continued “business operations with limited disruption” and remained engaged in performing its principal activities.

However, it said it was difficult to quantify the likely financial impact of the evolving situation.

No dividends were paid to Facebook’s Menlo Park, California-based parent.

Focus will now turn to the federal government’s plan to force tech players Facebook and Google to pay millions of dollars for news content in Australia, under a planned mandatory code of conduct to be finalised by July.

The recent ACCC digital platforms inquiry found 17.3 million Australians use Facebook’s main site every month. It also found there were 11.2 million users of the Facebook-owned Instagram.

The ACCC inquiry, completed last year, concluded that Facebook had “substantial market power” in the areas in which it ­operated across Australia and that this market power was unlikely to erode in the short to ­medium term.

It also concluded that Facebook benefited from “advantages of scope” in its collection of data from consumers using the Facebook-owned and operated platforms, including the Facebook, Instagram, Messenger and Whats­App platforms.