Facebook Gains From Surge In Pandemic Ad Spending But Warns Of Apple’s New Privacy Policy

The largest social media company of the world Facebook has warned that its growth later this year could “significantly” drop because of new Apple Inc privacy policies which will make it much more difficult for the company to target ads. This warning was issued by the company while it reported estimate beating quarterly revenues and profits for its latest completed quarter.

The company reported a 48 per cent growth in the quarter when the pandemic forced people to shop online which resulted in a surge in digital ad spending during the pandemic. The company also benefited by higher ad prices.

In order to expand beyond its ad business, it will focus on building e-commerce features as a future strategy, said the largest social network of the world.

“We have a long way to go to build out a full-featured commerce platform … but I am very committed to getting there,” Facebook Chief Executive Mark Zuckerberg told analysts on a conference call to discuss earnings.

For the first quarter ended March 31, the company reported total revenues of $26.17 billion which primarily comprises of ad sales. This was higher than analysts’ average estimate of $23.67 billion, according to IBES data from Refinitiv.

During the Covid-19 pandemic, there has been a boom in the digital advertising industry which has benefitted Facebook and other tech giants such as Google. 

“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.

Building up augmented and virtual reality, e-commerce features and devising strategies for that will allow content creators to earn money on Facebook’s platforms are the three key focus areas of the company, Zuckerberg said.

There was a 10 per cent rise in monthly active users on Facebook to 2.85 billion.

The company also reported a net income of $9.5 billion, or $3.30 per share for the first quarter compared to $4.9 billion, or $1.71 per share, for the same period a year earlier. Analysts had expected a profit of $2.37 per share.

Facebook plans to invest in consumer hardware products like Oculus virtual reality headsets and infrastructure during the current year which will take the total expenses for the year for the company in the range of $70 billion to $73 billion, Facebook said.

The company also expects an impact on its business in the second quarter because of the iPhone privacy change by Apple, Facebook said.  The company however added that there can be sequential slowdown in growth in third- and fourth-quarter revenue.

Apple has recently announced the roll out of a new feature on iPhones that will mandate all app developers on iPhones to ask explicit permission from users for gathering user data form them for targeted ads which has been severely criticised by Facebook. This change in privacy policy by Apple will hit Facebook’s business as well as smaller companies that depend on personalized advertising, the social media company has said.

A number of new features which included an affiliate program to that allows content creators to earn from a cut of sales generated from recommending products on Instagram have been tested recently by the company.

(Adapted from GadgetsNow.com)

Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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