Facebook's user engagement dips on news feed tweaks

Facebook Inc reported slightly slower-than-expected growth in daily active users in the latest quarter and said changes made to the News Feed reduced the time spent by users by about 50 million hours every day.

Shares of the company were down 3 per cent at $181.26 after the bell on Wednesday.

Facebook said about 1.40 billion people were using its service daily as of Dec. 31, up 14 per cent from a year earlier, compared with analysts' estimate of 1.41 billion, according to financial data and analytics firm FactSet.

Facebook had warned earlier this month that user engagement would take a hit in the near term from attempts to tweak its flagship News Feed feature.

"Already last quarter, we made changes to show fewer viral videos to make sure people's time is well spent," Chief Executive Mark Zuckerberg said in a statement.

The company also plans to highlight "trustworthy" news in the feed following allegations that Russian operatives and others spread false reports on the site, particularly during the 2016 U.S. Presidential election.

This change is set to shrink the amount of news on Facebook to about 4 per cent of all content from 5 per cent currently. Net income attributable to Facebook shareholders rose to $4.27 billion, or $1.44 per share, in the fourth quarter ended Dec. 31 from $3.56 billion, or $1.21 per share, a year earlier.

Excluding a tax provision, the company earned $2.21 per share, topping analysts' estimates of $1.95, according to Thomson Reuters I/B/E/S.

Total revenue rose 47 per cent to $12.97 billion, while full-year revenue was also up 47 per cent at $40.65 billion.

Total advertising revenue was $12.78 billion, compared with analysts' estimate of $12.30 billion, according to Thomson Reuters I/B/E/S. Mobile ad revenue accounted for 89 per cent of the total ad sales, up from 84 per cent a year earlier.