# Facebook’s slowdown warning hangs over strong ad sales, while Zuckerberg talks ‘metaverse’
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-07-29
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Facebook Warns of Significant Revenue Growth Slowdown Amid Apple Privacy Changes
Meta Description: Facebook anticipates a slowdown in revenue growth as Apple's iOS updates impact ad targeting. User growth rate slows down, requiring vaccination for U.S.
URL: https://financedigest.com/facebooks-slowdown-warning-hangs-over-strong-ad-sales-while-zuckerberg-talks-metaversehtml

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By Elizabeth Culliford and Nivedita Balu

(Reuters) -Facebook Inc said on Wednesday it expects revenue growth to “decelerate significantly,” sending the social media giant’s shares down 3.5% in extended trading even as it reported strong ad sales.

The warning overshadowed the company’s beat on Wall Street estimates for quarterly revenue, bolstered by increased advertising spending as businesses build their digital presence to cater to consumers spending more time and money online.

Facebook said it expects Apple’s recent update to its iOS operating system to [impact its ability to target](https://www.financedigest.com/sap-boosts-brand-awareness-using-gumgums-high-impact-ad-formats-and-veritytm-gumgums-advanced-contextual-targeting-solution.html "SAP boosts brand awareness using GumGum’s high impact ad formats and VerityTM, GumGum’s advanced contextual targeting solution") ads and therefore ad revenue in the third quarter. The iPhone maker’s privacy [changes make it harder for apps to track users and restrict advertisers](https://www.financedigest.com/uk-watchdog-warns-crypto-firms-to-prepare-for-advertising-rule-change.html "UK watchdog warns crypto firms to prepare for advertising rule change") from accessing valuable data for targeting ads.

The [company also announced on Wednesday that it would require anyone working](https://www.financedigest.com/alone-together-how-to-maintain-a-positive-company-culture-while-working-remotely.html "Alone together: How to maintain a positive company culture while working remotely") at its U.S. offices to be [vaccinated against COVID-19](https://www.financedigest.com/factbox-countries-making-covid-19-vaccines-mandatory-2.html "Factbox-Countries making COVID-19 vaccines mandatory"), joining Alphabet Inc and Netflix.

Monthly active users came in at 2.90 billion, up 7% from the same period last year but missing analyst expectations of 2.92 [billion and marking](https://www.financedigest.com/spotify-listeners-cross-half-a-billion-mark.html "Spotify listeners cross half a billion mark") the slowest growth rate in at least three years, according to IBES data from Refinitiv.

The user growth slowdown is notable and highlights the engagement [challenges as the world](https://www.financedigest.com/world-tourism-organization-unwto-and-sommet-education-launch-hospitality-challenge-pitch.html "World Tourism Organization (UNWTO) and Sommet Education launch Hospitality Challenge Pitch") opens up. But importantly, Facebook is the most exposed to [Apple’s privacy changes](https://www.financedigest.com/apple-forced-to-change-charger-in-europe-as-eu-approves-overhaul.html "Apple forced to change charger in Europe as EU approves overhaul"), and it looks like it is starting to have an impact to the outlook beginning in 3Q,” said Ygal Arounian, an analyst at Wedbush Securities.

Brian Wieser, GroupM’s global president of business intelligence, said all social media companies would see slower growth in the second half of the [year and that it would take more concrete warnings](https://www.financedigest.com/eu-could-face-gas-shortage-next-year-iea-warns.html "EU could face gas shortage next year, IEA warns") about activity in June and July for anyone to anticipate a “meaningful deceleration.

Facebook’s total revenue, which primarily consists of ad sales, rose about 56% to $29.08 billion in the second quarter from $18.69 billion a year earlier, [beating analysts’ estimates](https://www.financedigest.com/yum-beats-sales-estimates-as-customers-flock-to-kfc-taco-bell-deals.html "Yum beats sales estimates as customers flock to KFC, Taco Bell deals"), according to IBES data from Refinitiv.

Its revenue from advertising rose 56% to $28.58 [billion in the second](https://www.financedigest.com/unicredit-gets-ecbs-green-light-for-second-1-billion-euro-share-buyback.html "UniCredit gets ECB’s green light for second 1 billion euro share buyback") quarter ended June 30, Facebook said. It pointed to a 47% [increase in price](https://www.financedigest.com/coca-cola-hbcs-annual-profit-beats-warns-of-price-increases.html "Coca-Cola HBC’s annual profit beats, warns of price increases") per ad.

In the third and fourth quarters of 2021, we expect year-over-year total revenue growth rates to decelerate significantly on a sequential basis as we lap periods of increasingly [strong](https://www.financedigest.com/impact-com-ends-2022-with-strong-momentum-driven-by-client-and-agency-partner-growth.html "impact.com Ends 2022 with Strong Momentum Driven by Client and Agency Partner Growth") growth,” Chief Financial Officer Dave Wehner said in the earnings release.

Net income in the [second quarter](https://www.financedigest.com/dollar-pares-gains-as-us-growth-contracts-for-second-quarter.html "Dollar pares gains as US growth contracts for second quarter") more than doubled to $10.4 billion, or $3.61 per share. Analysts had [expected a profit](https://www.financedigest.com/lufthansa-expects-further-significant-improvement-after-return-to-profit.html "Lufthansa expects further ‘significant improvement’ after return to profit") of $3.03 per share.

The world’s largest social network has been ramping up its ecommerce efforts, which are expected to bring additional [revenue to the company](https://www.financedigest.com/generic-oncology-drugs-market-2021-global-leading-companies-analysis-revenue-trends-and-forecasts-2027.html "Generic Oncology Drugs Market 2021 Global Leading Companies Analysis, Revenue, Trends and Forecasts 2027") and make its ad inventory more valuable. The push will be key to how Facebook, which hosts more than 1 [million online “Shops” on its main app](https://www.financedigest.com/ride-hailing-app-cabify-raises-110-million-for-expansion-in-latam-spain.html "Ride-hailing app Cabify raises 0 million for expansion in LatAm, Spain") and Instagram, can grow its ad business amid the impact of Apple’s changes.

It is also on the offensive to attract top [social media personalities](https://www.financedigest.com/ai-and-social-media-are-revolutionizing-personal-finance-in-2023.html "AI and Social Media Are Revolutionizing Personal Finance in 2023") and their fans, competing with Alphabet’s YouTube and short-video app TikTok, which recently hit 3 billion global downloads. Facebook said this month it would [invest more than $1 billion](https://www.financedigest.com/toyota-motor-to-invest-5-3-billion-in-japan-u-s-for-ev-battery-supply.html "Toyota Motor to invest .3 billion in Japan, U.S. for EV battery supply") to support content creators through the end of 2022.

On a conference call with analysts, [CEO Mark Zuckerberg also focused on another ambition for the company:](https://www.financedigest.com/elon-musk-who-runs-four-other-companies-will-now-be-twitter-ceo.html "Elon Musk, who runs four other companies, will now be Twitter CEO") the “metaverse.

Zuckerberg this [week announced that Facebook](https://www.financedigest.com/facebook-parent-meta-is-preparing-large-scale-layoffs-this-week-wsj.html "Facebook parent Meta is preparing large-scale layoffs this week – WSJ"), which has invested heavily in virtual reality and augmented reality, was setting up a team to work on building a shared digital world, which he is betting will be the successor to the mobile internet. Microsoft also dropped the buzzy [Silicon Valley](https://www.financedigest.com/exclusive-u-s-regulator-seeks-sale-of-silicon-valley-bank-signature-bank-portfolios-sources.html "Exclusive-U.S. regulator seeks sale of Silicon Valley Bank, Signature Bank portfolios-sources") term on its earnings call this week, talking about its own plans for the converging digital and physical worlds.

Facebook has its eye on a sci-fi prize,” said Sophie Lund-Yates, equity analyst at [Hargreaves Lansdown](https://www.financedigest.com/uks-hargreaves-lansdown-ceo-hill-to-step-down.html "UK’s Hargreaves Lansdown CEO Hill to step down"). “This is little more than an ambition for Facebook at the moment…if the idea comes to fruition, it could be a valuable income source.”

The company also continues to face [pressure from global lawmakers and regulators](https://www.financedigest.com/analysis-u-s-regulators-could-be-pressured-by-slim-republican-house-control.html "Analysis-U.S. regulators could be pressured by slim Republican House control"), including from the U.S. Federal [Trade Commission](https://www.financedigest.com/fix-trading-community-releases-recommended-practices-for-commission-unbundling-as-required-by-mifid-ii.html "FIX Trading Community releases Recommended Practices for Commission Unbundling as required by MiFID II") which has until Aug. 19 to refile its antitrust complaint against the [company and from a group of states who said on Wednesday they would appeal the judge’s dismissal of their lawsuit](https://www.financedigest.com/game-company-roblox-enabled-girls-sexual-exploitation-lawsuit-claims.html "Game company Roblox enabled girl’s sexual exploitation, lawsuit claims"). Facebook’s market cap [hit $1 trillion for the first time last month](https://www.financedigest.com/german-bonds-set-for-worst-month-in-decades-as-inflation-hits-new-highs.html "German bonds set for worst month in decades as inflation hits new highs") when the judge threw out the original complaints.

The company, which has long been under fire from lawmakers over misinformation and other abuses on its apps, has also come under renewed scrutiny from President Joe Biden’s administration over the handling of [false claims](https://www.financedigest.com/philips-subsidiary-to-pay-over-24-million-for-alleged-false-claims-for-medical-equipment.html "Philips subsidiary to pay over million for alleged false claims for medical equipment") about COVID-19. At Facebook’s [office in Washington](https://www.financedigest.com/marc-kaufman-joins-rimon-as-partner-in-its-washington-d-c-office.html "Marc Kaufman, joins Rimon as Partner in its Washington D.C. office"), D.C., on Wednesday, a group of [critics set](https://www.financedigest.com/pm-rishi-sunak-sets-out-priorities-for-britain-responds-to-critics.html "PM Rishi Sunak sets out priorities for Britain, responds to critics") up an installation of body bags to protest the issue.

(Reporting by Nivedita Balu in Bengaluru and Elizabeth Culliford in New York; Additional reporting by Danielle Kaye in New York and Sheila Dang in Dallas; Editing by Maju Samuel and Lisa Shumaker)


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