Facebook Blows Past Revenue Estimates but Warns Apple Change Could Hobble Growth

FILE PHOTO: The Facebook logo is displayed on a mobile phone in this picture illustration taken December 2, 2019. REUTERS/Johanna Geron/Illustration

Facebook Inc 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 Inc privacy policies will make it more difficult to target ads.

The world’s largest social network, whose shares rose 6.5% in extended trading, has blasted Apple over its requirement that iPhone app developers begin asking users’ permission to collect certain data for ads. Facebook says the change would harm its business and hurt small companies that rely on personalized advertising.

At the same time, it has built shopping and e-commerce features within Facebook and Instagram, which are expected to bring additional revenue to the company and make its ad inventory more valuable.

Total revenue, which primarily consists of ad sales, rose 48% to $26.17 billion in the first quarter ended March 31, beating analysts’ average estimate of $23.67 billion, according to IBES data from Refinitiv.

Facebook said ad revenue growth was driven by a 30% year-over-year rise in the average price per ad for the first quarter and a 12% increase in the number of ads delivered.

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The digital advertising industry took a hit at the start of the COVID-19 pandemic in early 2020, but quickly boomed as businesses rushed online to reach customers and ramp up e-commerce sales, defying expectations of many ad analysts and industry observers.

“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. “As Snap and Google previously demonstrated with their strong results, digital advertising spending is coming back, fast.”

Facebook Chief Executive Officer Mark Zuckerberg discussed the company’s focus on three main areas in a call with analysts on Wednesday: augmented and virtual reality, e-commerce and how content creators can earn money on Facebook’s platforms. Facebook recently teased a slew of new features to help creators connect with brands and make money directly from fans. 

Monthly active users on Facebook rose 10% to 2.85 billion, matching analyst expectations.

Net income for the first quarter came in at $9.5 billion, or $3.30 per share, compared with $4.9 billion, or $1.71 per share, a year earlier. Analysts had expected a profit of $2.37 per share.  

Facebook said its total expenses for the year would be in the range of $70 billion to $73 billion, as it invests in consumer hardware products like Oculus virtual reality headsets and infrastructure. 

Reporting by Noor Zainab Hussain in Bengaluru and Sheila Dang and Elizabeth Culliford in New YorkEditing by Arun Koyyur and Matthew Lewis; Reuters


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