Facebook Warns Of Q3 Slowdown Due To Apple Tracking Restrictions

facebook warns of q3 slowdown due to apple tracking restrictions

Facebook’s Q2 advertising revenue soared 56% to $28.5 billion year-over-year, though the company warned investors it expects a revenue slowdown beginning in Q3 – the same time it will feel the full impact of Apple’s recent AppTrackingTransparency changes.

The total number of ad impressions served across Facebook increased 6%, while the average price per ad jumped 47%. The social media giant also saw the number of daily active users increase 7% YoY to 1.91 billion. Monthly active users also climbed 7% to reach 2.9 billion.

Facebook COO Sheryl Sandberg cited CPG, ecommerce and retail – verticals that performed well during the pandemic – as big growth drivers.

“Our performance continues to be driven by the ongoing digital transformation, accelerated during the pandemic, and our long-term investments in tools and products to help businesses make the shift online,” she said, adding that new features as Stories and Reels are creating new ways for advertisers to reach consumers.

facebook warns of q3 slowdown due to apple tracking restrictions

Though Facebook easily beat earnings estimates for the three months ending June 30, CFO Dave Wehner said the company expects year-over-year total revenue growth to significantly slow, sending shares down 3.62% in after-hours trading.

“Viewing growth on a two-year basis … we expect …  total revenue growth rates to decelerate modestly in the second half compared to the second quarter rates,” he said.

Facebook is also expecting strong “ad targeting headwinds” in 2021 as a result of regulatory and platform changes, most notably Apple’s recent iOS 14.5 privacy changes, “which we expect to have a more significant impact in the third quarter compared to the second quarter,” Wehner said.

Wehner did not provide any figures when investors asked about opt-in rates among iOS users for Facebook and Instagram.

“The impact of the ATT changes has really generally been in line with our expectations,” he said. “We’re obviously benefiting, as others are, from a very strong macro environment for advertising. But this has been very challenging for advertisers to navigate.”

Facebook has been working with advertisers through its Aggregated Events Management API – which uses aggregated data for targeting and measurement of iOS 14 users’ web events. Facebook also uses machine learning and AI to help rank apps.

“Overall, we do think there are opportunities to continue to improve our capabilities through investments in areas like machine learning and AI to make ads more effective,” he said. “And if we can get advertisers to get the same number of conversions from fewer ads that’s great.”

One analyst asked about the impact of the ATT changes to targeting on branding and direct-response ads, saying several marketers had pulled back on some ad formats on Facebook and other platforms because of the changes.

Wehner said that both brand and direct-response ads are performing well. Sandberg added that traditional brand advertisers have become savvier across Facebook’s different ad formats, such as direct-response, as well as its measurement tools.

“Direct-response continues to be the bulk of our business and the primary driver of growth,” Wehner said, adding that brand ads rebounded after taking a hit in 2020. “Categories that led during the pandemic continue to do well and those are all highly DR-centric verticals like commerce.”