Facebook anticipates tougher 2021 even as pandemic boosts ad revenue

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In this news, we discuss the Facebook anticipates tougher 2021 even as pandemic boosts ad revenue.

(Reuters) – Facebook Inc on Thursday warned of a tougher 2021 despite beating analyst estimates for quarterly revenue, as companies adapting to the global coronavirus pandemic continue to rely on the company’s digital advertising tools.

The world’s largest social media company said in its outlook that it faces “a significant amount of uncertainty,” citing impending privacy changes by Apple and a possible reversal of the e-commerce shift it caused. by the pandemic.

“Since e-commerce is our largest advertising vertical, a change in this trend could be a barrier to our ad revenue growth in 2021,” he said.

The company’s shares have remained stable in prolonged trading.

Facebook’s financial results from Google and Amazon demonstrate how resilient tech giants have been even as the pandemic devastated other parts of the economy.

This success has earned them further scrutiny in Washington, where companies face multiple antitrust investigations.

Facebook’s total revenue, which is mostly advertising sales, rose 22% to $ 21.47 billion from $ 17.65 billion in the third quarter ended Sept. 30, beating analyst estimates of a rise by 12%, according to IBES data from Refinitiv.

A July ad boycott ended Facebook’s handling of hate speech by the social media giant, which has seen some of the social media giant’s biggest spenders take a hiatus, has barely kicked off its sales, which are mostly from small businesses.

Income growth at Facebook, the world’s second-largest online ad seller after Google, is steadily cooling down as its business matures, although it has grown to over 20% throughout 2019.

Still, compared to expectations, the company has had a bumper year due to the increasing use of its platforms by users stranded in their homes amid virus lockdowns, which dampened online ad sales so far. even wider economic activity suffered.

GROWTH OF THE USER BASE

Facebook continued to expand its user base, with monthly active users rising to 2.74 billion, up from 2.70 billion according to IBES data, although the number of users declined in North America compared to in the second trimester.

The company forecast this trend to continue for the rest of the year, with user numbers flat or slightly down in the fourth quarter compared to the third quarter.

“It appears investors are disappointed that despite user growth which jumped in most regions during the quarter, the social media platform reported a decrease in user numbers in North America , which covers the United States and Canada – its most lucrative advertising market, ”said Jesse Cohen, senior analyst at Investing.com.

Total spending rose 28% to $ 13.43 billion, costs Facebook tries to grow its non-advertising business and quell criticism that its handling of user privacy and abusive content is lax.

Facebook CFO Dave Wehner said on a results conference call that expenses would rise due to the costs of returning staff working from home to offices, as well as increased headcount, product investments and higher legal fees.

He said the company expected its margin to decline as a result, although he did not give specific revenue forecasts.

The company has come under particularly heavy pressure ahead of next week’s US presidential election and aims to avoid a repeat of 2016, when Russia used its platforms to spread election-related disinformation.

According to Debra Aho Williamson, senior analyst at EMarketer Facebook remains “a benchmark for advertisers” looking to reach a wide range of consumers, despite its content moderation issues, but said that could change in 2021.

“We expect more advertisers to address their addiction Facebook and wonder if the environment is safe for their brands, ”she said.

Net income stood at $ 7.85 billion, or $ 2.71 per share, from $ 6.09 billion, or $ 2.12 per share, a year earlier. Analysts had expected earnings of $ 1.90 per share, according to IBES data from Refinitiv.

Reporting by Noor Zainab Hussain in Bengaluru and Katie Paul in San Francisco; Edited by Cynthia Osterman

Original © Thomson Reuters

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