Facebook India posts 84% jump in FY19 profit

Social media giant Facebook has reported revenues of Rs 892 crore, compared to revenues of Rs 521 crore, a 71% jump in revenues and a net profit of Rs 105 crore, up 84% from last fiscal for fiscal year ended 31 March 2019, documents filed with the registrar of companies (RoC) show. The company had reported a net profit of Rs 57 crore for fiscal 2018.

People familiar with developments at the company are attributing the rise in revenues and profit to a shift to the local selling structure for its ads model in October 2018. This meant ad revenue previously recorded in Dublin started getting recorded in India. Consequently, the company has six months of ad revenue reflecting in its P&L for fiscal 2019.

Facebook stated in its filings till the previous year, the company had a single business segment for providing IT enabled business process outsourcing and that during the period under review for fiscal 2019, in addition to the existing business, the company commenced acting as a non exclusive reseller of advertising inventory to customers in India for a related corporation.

Facebook said the company acts as a reseller of advertising inventory to local customers through a reseller agreement with another group company and generates revenues primarily through resale of advertising inventory on Facebook. These revenues consist primarily of advertising revenues generated by displaying ad products on Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications. The control to operate the websites is with the group companies and not with the company. Accordingly , the company reports revenues from advertising sales net of associated direct cost of sales on a net basis in the statement of its profit and loss account.

For its primary business, which it referred to as the IT enabled business process outsourcing service agreement, the company reported revenues of Rs 628 crore. The advertising reseller business segment revenues were reported as Rs 263 crore for fiscal 2019.

At the end of 2017, the company publicly announced that it would be moving to a local selling structure everywhere it has an office supporting local sales. The company had said previously that this move was aimed at providing policy makers with more visibility over the revenues that are locally supported in their countries. People familiar with developments at the company said that it started the phased migration of its self served customers (online sales) in January 2019 and it was completed post this financial year. Eventually, all ads revenue earned in India will be billed, reported and collected through Facebook India, people familiar with the matter said.