Facebook Benefits From Pandemic Ad Spending but Warns Apple Privacy Policies Could Spoil Its Party

Monthly active users on Facebook rose 10 percent to 2.85 billion.

By Reuters | Updated: 29 April 2021 10:55 IST

Facebook Benefits From Pandemic Ad Spending but Warns Apple Privacy Policies Could Spoil Its Party

Shares of Facebook rose 6.5 percent to $326 (roughly Rs. 24,140) in extended trading

Highlights

The digital advertising industry has boomed during the pandemic
Monthly active users on Facebook rose 10 percent to 2.85 billion
Facebook expects the iPhone privacy change to impact the second quarter

Facebook beat Wall Street expectations for both quarterly revenue and profit on Wednesday but warned that growth later this year could "significantly" decline as new Apple privacy policies will make it more difficult to target ads.

A surge in digital ad spending during the pandemic when consumers shopped online, along with higher advertisement prices, helped Facebook revenue surge 48 percent. Looking ahead, the world's largest social network said it will focus on building e-commerce features to expand beyond its advertisement business.

Shares of Facebook rose 6.5 percent to $326 (roughly Rs. 24,140) in extended trading.

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"We have a long way to go to build out a full-featured commerce platform...but I am very committed to getting there," said Facebook Chief Executive Mark Zuckerberg, during an earnings call with analysts.

Total revenue, which primarily consists of advertisement sales, rose 48 percent to $26.17 billion (roughly Rs. 1,93,800 crores) in the first quarter ended March 31, beating analysts' average estimate of $23.67 billion (roughly Rs. 1,75,280 crores), according to IBES data from Refinitiv.

The digital advertising industry has boomed during the pandemic as consumers stayed home and shopped online, benefiting Facebook and others including Google, whose parent company Alphabet reported record quarterly profit on Tuesday.

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"Despite several headwinds - such as ongoing antitrust scrutiny, lingering privacy concerns, as well as looming changes which could negatively impact its advertising business - Facebook delivered another blockbuster quarter," said Jesse Cohen, senior analyst at Investing.com.

Zuckerberg said the company plans to focus on three key areas: building augmented and virtual reality, e-commerce features, and helping content creators earn money on Facebook's platforms.

Monthly active users on Facebook rose 10 percent to 2.85 billion.

Net income for the first quarter came in at $9.5 billion (roughly Rs. 70,360 crores), or $3.30 (roughly Rs.240) per share, compared with $4.9 billion (roughly Rs. 36,290 crores), or $1.71 per share (roughly Rs. 130), a year earlier.

Facebook said its total expenses for the year would be in the range of $70 billion (roughly Rs. 5,18,670 crores) to $73 billion (roughly Rs. 5,40,900 crores), as it invests in consumer hardware products like Oculus virtual reality headsets and infrastructure.

Apple changes

On Wednesday, Facebook said it expects the iPhone privacy change to impact the second quarter, but third and fourth quarter revenue growth could slow sequentially.

Facebook has blasted Apple over its requirement that iPhone app developers begin asking users' permission to collect certain data for advertisements. Facebook says the change would harm its business and hurt small companies that rely on personalised advertising.

Its push to build shopping and e-commerce features within Facebook and Instagram are expected to bring additional revenue to the company and make its advertisement inventory more valuable.

The company recently teased a slew of new features, including an affiliate programme to let content creators earn a cut of sales generated from recommending products on Instagram.

Earlier this month, Facebook announced it was building a bevy of audio products including live audio rooms to rival the popular app Clubhouse plus in-app music and podcast players.

The company remains under scrutiny over its power as it faces major antitrust lawsuits from a large group of US states and the Federal Trade Commission, and is under regular fire from lawmakers and rights groups for its content moderation policies, algorithmic systems and handling of users' data.

We dive into all things Apple — iPad Pro, iMac, Apple TV 4K, and AirTag — this week on Orbital, the Gadgets 360 podcast. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, and wherever you get your podcasts.

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