Facebook posts strong Q2 growth but predicts future slowdown

29 Jul 2021

Image: © Brad Pict/Stock.adobe.com

The social media giant surpassed Wall Street earnings expectations as it continues to squeeze more money from advertising.

Facebook’s earnings report for the second quarter of 2021 showed strong growth, surpassing market expectations for the company’s performance.

In the second three months of the year, the company generated $29.1bn in revenue, up 56pc year on year and ahead of Wall Street expectations of about $27.8bn. Its total profit came to $10.4bn, or $3.61 per share, representing growth of 101pc.

The more rapid growth of profit over revenue suggests Facebook continues to improve its ability to monetise its user base across its different services. In the earnings call, Facebook CFO David Wehner noted the average price of the company’s ads had increased 47pc year on year.

Monthly active users across its services – which include Facebook, Instagram and WhatsApp – reached 3.51bn by 30 June, representing growth of 12pc in the last year. Of those, 2.9bn were using the Facebook platform on a monthly basis, a 7pc increase.

Mark Zuckerberg, the company’s founder and CEO, commented: “We had a strong quarter as we continue to help businesses grow and people stay connected. 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.”

On top of increasing ad prices, Zuckerberg noted that another trend was the ever-increasing importance of video. He noted that “video now accounts for almost half of all time spent on Facebook” and that Instagram’s Reels feature is the “largest contributor” to the growth of user engagement on that service.

However, Wehner’s commentary on the figures was less optimistic when looking ahead. He said that the company expects year-on-year rates of revenue growth to “decelerate significantly on a sequential basis” in Q3 and Q4 of this year as the company “lap[s] periods of increasingly strong growth”.

“When viewing growth on a two-year basis to exclude the impacts from lapping the Covid-19 recovery, we expect year-over-two-year total revenue growth to decelerate modestly in the second half of 2021 compared to the second quarter growth rate.”

Wehner also noted that external factors would limit Facebook’s ability to increase its ad revenue, saying the company expects “increased ad targeting headwinds in 2021 from regulatory and platform changes,” mentioning that the recent iOS updates would have greater effect in Q3 and beyond.

The company has faced increasing scrutiny in recent months with WhatsApp being investigated by European data protection authorities and amid complaints that Australian alcohol companies were using its platforms to advertise to children.

Zuckerberg, meanwhile, has been heavily promoting his vision of the “metaverse” as led by Facebook, and has been assembling experts in mobile development and AR and VR to work on the company’s offerings in that wider area.

Jack Kennedy is a freelance journalist based in Dublin