Facebook’s slowdown warning is based on strong ad sales, while Zuckerberg speaks of “metaverse”

(Reuters) -Facebook Inc. said on Wednesday it expects revenue growth to “slow significantly”, which will cause the shares of the social media giant to fall 3.5% in expanded trading, although it recorded strong ad sales.

The warning overshadowed the company’s pace in Wall Street estimates for quarterly revenue, bolstered by rising advertising spending as companies build their digital presence to serve consumers who spend more time and money on line.

Facebook said it expects Apple’s recent update to its iOS operating system to affect its ability to target ads and therefore advertising revenue in the third quarter. IPhone maker privacy changes make it difficult for users to track and restrict advertisers from accessing valuable data to target their ads.

The company also announced Wednesday that it would require anyone working in its U.S. offices to be vaccinated against COVID-19, joining Alphabet Inc and Netflix.

Monthly active users reached 2,902 million, 7% more than the same period last year, but analysts’ expectations of 2,992 million were lost and marked the slowest growth rate in at least three years, according to Refinitiv IBES data.

“The slowdown in user growth is remarkable and highlights the challenges of engagement as the world opens up. But most importantly, Facebook is the most exposed to Apple’s privacy changes and seems to be starting to have an impact on the outlook from Q3, ”said Ygal Arounian, an analyst at Wedbush Securities.

Brian Wieser, GroupM’s global president of business intelligence, said all social media companies would see slower growth in the second half of the year and that more specific notices of activity would be needed in June and June. July so that everyone anticipates a “significant slowdown”.

PHOTO FILE: A Facebook panel is seen during the Cannes Lions International Creativity Festival in Cannes, France, on June 20, 2018. REUTERS / Eric Gaillard / File Photo

Facebook’s total revenue, which consists primarily of ad sales, rose about 56% to $ 29.08 million in the second quarter from $ 18.69 million the previous year, surpassing estimates from analysts, according to Refinitiv’s IBES data.

Its advertising revenue rose 56 percent to $ 28.58 million in the second quarter ended June 30, Facebook said. He noted a 47% increase in the price per ad.

“In the third and fourth quarters of 2021, we expect total year-on-year revenue growth rates to slow significantly significantly sequentially as we go through periods of increasingly strong growth,” CFO Dave Wehner said in a statement benefits.

Second-quarter net income more than doubled to $ 10.4 billion, or $ 3.61 per share. Analysts had expected a profit of $ 3.03 per share.

The world’s largest social network has stepped up its e-commerce efforts, which are expected to bring additional revenue to the company and make its advertising inventory more valuable. The push will be key to how Facebook, which hosts more than a million online stores on its main app and Instagram, can grow its advertising business amid the impact of Apple’s changes.

It’s also offensive to attract top social media personalities and their fans, competing with the YouTube alphabet and short video app TikTok, which recently garnered 3 billion downloads worldwide. Facebook said this month that it would invest more than $ 1 billion to support content creators by the end of 2022.

In a conference call with analysts, CEO Mark Zuckerberg also focused on another ambition for the company: the “metaverse”.

Zuckerberg announced this week that Facebook, which has invested heavily in virtual reality and augmented reality, was creating a team to work on building a shared digital world, which it bets will be the successor to the mobile internet. Microsoft also dropped Silicon Valley’s unloaded deadline in its earnings call this week, talking about its own plans for the converging digital and physical world.

“Facebook has its gaze set on a science fiction award,” said Sophie Lund-Yates, a Hargreaves Lansdown equity analyst. “That’s little more than an ambition for Facebook right now … if the idea comes to fruition, it could be a valuable source of revenue.”

The company also continues to face pressure from global lawmakers and regulators, including the U.S. Federal Trade Commission, which has until Aug. 19 to file its antitrust complaint against the company and a group of states that go say Wednesday they would appeal the judge’s dismissal of his lawsuit. Facebook’s market cap reached $ 1 trillion for the first time last month when the judge dismissed the original allegations.

The company, which has long been rejected by lawmakers for misinformation and other abuses of its applications, has also been under renewed scrutiny by the administration of President Joe Biden for handling false claims about COVID -19. On Wednesday at the Facebook office in Washington, DC, a group of critics set up a bag installation to protect the issue.

Reports of Nivedita Balu in Bengaluru and Elizabeth Culliford in New York; Additional reports by Danielle Kaye in New York and Sheila Dang in Dallas; Edited by Maju Samuel and Lisa Shumaker

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