Following in the footsteps of Google, social media behemoth Facebook posted good earnings in the second quarter. In extended trading on Wednesday, Facebook shares plummeted as much as 5% as the social network firm said revenue growth will decelerate in the coming quarters, despite second-quarter earnings above expectations.
Important Second-Quarter earnings:
- Facebook’s second-quarter revenue increased 56 percent year over year to USD 29.1 billion, confounding the company’s predictions for a downturn. Operating profit quadrupled to USD 12.4 billion from USD 6.0 billion a year earlier, despite costs growing at a slower 31 percent. Facebook’s net profit increased to USD 10.4 billion, up from USD 5.2 billion in the same time the previous year.
- In June, the number of daily and monthly active users on Facebook increased by 7% year over year, reaching 1.81 billion and 2.90 billion, respectively. Daily and monthly active individuals were 2.76 billion and 3.51 billion, respectively, up 12 percent when included its other assets such as Instagram and WhatsApp.
- In the fourth quarter, Facebook invested USD 4.74 billion and maintained its forecast for annual spending of USD 70-73 billion and capital expenditures of USD 19-21 billion in 2021. The firm has approximately USD 64 billion in cash on hand at the conclusion of the quarter. At the end of June, the number of employees had risen by 21% year on year to over 63,400.
- The firm stated that a 47 percent yearly rise in the average price per ad drove ad revenue growth, and it anticipates similar pricing increases throughout the rest of 2021. Nonetheless, revenue growth is projected to decelerate in the third and fourth quarters as the comparison gets more difficult after the pandemic’s impacts have been seen for over a year.
- According to industry tracker eMarketer, Facebook is on course to pull in more than $100 billion in yearly ad revenue for the first time.
- According to eMarketer, Google is the biggest digital ad publisher with over 29 percent of the market share, with Facebook coming in second with just under 24 percent.
Why the revenue halt?
Due to the implementation of Apple’s new advertising regulations on iOS, the firm has warned that revenue growth might halt. Facebook, like its competitor Google, appears to have benefited from the general improvement in economic conditions and the strengthening advertising industry.
The iOS modifications are also likely to have a bigger impact in Q3 than they did in Q2, and the firm is keeping an eye on regulatory obstacles, such as the continuing data transfer issues between the EU and the US.
Apple’s decision earlier this year triggered a feud with Facebook and other tech rivals, and it may have significant ramifications for data privacy and the mobile ecosystem. Apple started requiring applications to inform users of their mobile devices about the tracking data they intend to gather and obtain permission to do so.
Opting out of being monitored makes it more difficult for businesses like Facebook to target the advertising that generate money. On an earnings conference, Facebook Chief Financial Officer David Wehner stated, “This has been really hard for advertisers, and we’re working with them to assist manage these changes.”
Antitrust dismissal to be refiled
The findings come as antitrust regulators in the United States and worldwide are increasingly scrutinising Facebook and other major internet companies for their market dominance.
Last year, a lawsuit launched against Facebook in a US federal court was dismissed, but authorities are attempting to re-file the case, which may lead to the social media giant’s demise.
How’s Facebook doing this quarter?
According to eMarketer analyst Debra Aho Williamson, Facebook’s performance this quarter are exceptionally good and show no influence from Apple’s iOS upgrade.
“As the full effects of the Apple upgrade take place, the current quarter will be a lot more significant quarter to pay attention to,” she continued.
According to the analyst, higher pricing drove ad revenue gains, with “enormous” demand for Facebook and Instagram ad space driving competitiveness.
Facebook’s transition to Metaverse
On an earnings call, Zuckerberg stated that the social network is concentrating on expanding e-commerce and methods for artists to profit from their online content, as well as investing in the creation of an immersive digital environment known as the “metaverse.”
According to Zuckerberg, in the next years, people will shift their perceptions of Facebook from a social media company to a metaverse corporation. He believes that advertising will play a significant role in the metaverse, and that Facebook’s objective will not be to sell gadgets at a high price. Zuckerberg’s metaverse vision necessitates a sensation of presence in a virtual environment, which is why Facebook is aggressively spending in its Oculus business to develop the requisite gear. Facebook, according to Zuckerberg, will be able to profit from the metaverse by selling digital products and experiences.