Facebook posts strong numbers but outlook clouded by regulation

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Facebook Inc (NASDAQ:FB), the social media giant, sailed past market forecasts for its fourth quarter but saw its shares fall on a cautious statement about the outlook and regulatory and political worries.

Mark Zuckerberg, founder and chief executive, said in an update following the earnings statement that Facebook is looking at reducing political content and at ways to stop people using the site being directed toward political groups.

Social media has come under increased scrutiny following the 6 January invasion of the US Capitol building, which led to former President Trump being banned from Facebook for allegedly helping to stoke the riot.

Revenues in the three months to end December rose by 33% to US$28bn, while net income jumped by 53% to US$11.2bn.

Daily active users in December rose by 11% to 1.84bn and on a monthly basis by 12% year-on-year to 2.8bn.

David Wehner, chief financial officer, said Facebook had benefited from two trends: An ongoing shift towards online commerce and a shift in consumer demand towards products and away from services.

These provided a tailwind to the second half of the year but that situation might reverse in 2021, he added.

“We expect year-over-year growth rates in total revenue to remain stable or modestly accelerate sequentially in the first and second quarters of 2021.

“In the second half of the year, we will lap periods of increasingly strong growth, which will significantly pressure year-over-year growth rates.

“We also expect to face more significant ad targeting headwinds in 2021.

“This includes the impact of platform changes, notably iOS 14 [Apple’s operating system], as well as the evolving regulatory landscape.

“While the timing of the iOS 14 changes remains uncertain, we would expect to see an impact beginning late in the first quarter.”

Zuckerberg also had a dig at Apple’s new system, which requires apps to get permission to track user behaviour.

“Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to preference their own impact,” he said.

For the year to end-December 2020, Facebook posted revenues of US$86bn, up 22%, with net income rising by 58% to US$29.1bn.

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