In its quarterly results, Facebook showed strong growth, but it faces challenges in the second half of the year. In the second quarter, Facebook’s ad revenue hit $28.6 billion, an increase of 56% year-over-year.
David Wehner, Facebook’s chief financial officer, however, said that revenue growth could slow in the second half of the year. Wehner cited Apple’s privacy changes this year on the iPhone, which restricted apps’ access to data on consumers—the kind of data Facebook relies on for digital advertising.
“We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates, which we expect to have a greater impact in the third quarter compared to the second quarter,” Wehner said.
Facebook’s stock price dipped close to 4% in after-hours trading, partially because of the comments about “headwinds” ahead.
A pivotal moment in history
Facebook is at a pivotal moment in its history as it deals with more regulatory oversight of its apps, including Facebook, Instagram, WhatsApp and Messenger. The ad business is being affected by the changes from Apple and Google that make it harder to collect data on consumers across the web and serve them targeted ads. Also, last quarter, Facebook had a leadership change in its ad business with the departure of Carolyn Everson, head of global business solutions. For 10 years, Everson worked closely with major agencies and Facebook’s largest brands on advertising initiatives.
Facebook’s strategy with the “metaverse” served partly as a response to Apple’s privacy controls in its iPhone ecosystem. Rather than creating a computing platform controlled by one company, Zuckerberg said the metaverse “should be built in a way that is open for everyone to participate.”
A fully functional metaverse is still likely years away, though, and Facebook is working on quicker fixes, too. Facebook has been trying to make the social network more functional for businesses and online creators, keeping them within its ecosystem. For instance, Zuckerberg talked about how Facebook has built more e-commerce into Facebook, Instagram and WhatsApp, especially within the past year.
The push into e-commerce is meant to give brands a reason to sell directly on Facebook, and it gives consumers a way to shop there, which keeps data inside the ecosystem for better ad targeting and services.
When ads link outside of Facebook, they lead to websites that are “not personalized” and “not optimized,” Zuckerberg said.
Facebook is building commerce through Shops, which are digital storefronts on Facebook and Instagram. Facebook also is pushing into live video shopping, which is a hot activity on other social apps, too, like TikTok and Snapchat.
On top of commerce, Facebook is focused on creators, giving them ways to make money from content on its apps. Earlier this month, Facebook said it would pay creators $1 billion through 2022.
“We had a strong quarter as we continue to help businesses grow and people stay connected,” Zuckerberg said in the earnings announcement. “I’m excited to see our major initiatives around creators and community, commerce, and building the next computing platform coming together to start to bring the vision of the metaverse to life.”