Facebook Inc on Wednesday reported its profit doubled in the second quarter as digital advertising surged, but warned of cooler growth in the months ahead in an update that sent its shares sinking.
Profit rose to US$10.4 billion on revenue of US$29 billion, a 56 percent increase from last year, mainly from an increase in ad revenue, Facebook said.
The number of people using the social network monthly climbed to 2.9 billion, a year-on-year gain of 7 percent, while about 3.5 billion people used at least one of the company’s apps, including Instagram, WhatsApp and Messenger.
“We had a strong quarter, as we continue to help businesses grow and people stay connected,” Facebook CEO Mark Zuckerberg said in an earnings release.
Facebook shares slipped about 4 percent, as the tech giant warned that growth was expected to slow due to regulatory actions and a tweak to Apple Inc’s iPhone operating software that could hurt its ad targeting.
“We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recent iOS updates,” Facebook said in the earnings release.
The move by Apple early this year has sparked a rift with Facebook and other tech rivals, and could have major implications for data privacy and the mobile ecosystem.
Apple began requiring apps to tell users of its mobile devices what tracking information they want to collect and get permission to do so.
Opting out of being tracked makes it harder for companies such as Facebook to target the ads on which they depend for revenue.
“This has been very challenging for advertisers and we’re working with them to help navigate these changes,” Facebook chief financial officer David Wehner said on an earnings call.
Facebook won dismissal of a case brought in US federal court last year, but authorities are seeking to refile the case, which could potentially lead to a breakup of the social media giant.
The company is on track to bring in more than US$100 billion in annual ad revenue for the first time, according to industry tracker eMarketer.
Google is the top digital ad publisher with nearly 29 percent of the market, while Facebook has the second-largest share with just shy of 24 percent, eMarketer reported.
“This quarter’s Facebook results are extremely strong and show little sign of impact from Apple’s iOS update as of yet,” eMarketer analyst Debra Aho Williamson said.
The current quarter “will be a much more important quarter to pay attention to, as the full effects of the Apple update take hold,” she added.
Ad revenue gains were driven by increasing prices, with “enormous” demand for Facebook and Instagram ad space driving competition, the analyst said.
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