Tuesday, August 16, 2022

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    Facebook shrugs off whistleblowers and Apple tracking pains to see revenues surge 35%

    Facebook continues to prove remarkably resilient to negative press with the advertising-based business continuing to grow at a breakneck pace, as revenues rose 35% from a year earlier in its third-quarter results.

    The healthy financials fed through to a 17% rise in net income for the period to $9.2bn, up from just $7.8bn a year earlier, with the only clouds on the horizon appearing courtesy of Apple’s iOS 14 privacy changes, which will have a material impact on fourth-quarter results.

    Analysts had anticipated sales in this period to amount to £34.8bn, but as a result of Apple’s moves Facebook now expects revenues to fall within the $34bn to $31.5bn range, with pandemic-related effects and macroeconomic circumstances also scapegoated for the likely shortfall as individual challenges begin to compound.

    This includes a generalized reduction in spending by advertisers in response to global supply chain issues and a labor shortage.

    Singling out Apple for criticism, chief operating officer of Facebook Sheryl Sandberg said: “The biggest is the impact of Apple’s iOS 14 changes, which has created headwinds for others in the industry as well, major challenges for small businesses, and advantaged Apple’s own advertising business. We started to see that impact in Q2, but adoption on the consumer side ramped up by late June, so it hit critical mass in Q3. As a result, we’ve encountered two challenges.

    “On measurements, as we brought in a recent blog post, we believe we are under-reporting IOS web conversions. This means real-world conversions like sales and app installs are higher than what’s being reported for many advertisers, especially fall advertisers, we’re making good progress fixing that.

    “More than 60% of video revenue now comes from mobile-first video, meaning videos that are shot vertically or are under 15 seconds. Over 2 billion people per month now watch videos that are eligible for in-stream ads, which are ads shown before, during or after videos. And we’re expanding access to Reels ads on Instagram to more advertisers with automatic placement in new creative formats.”

    Apple upset the digital advertising ecosystem earlier this year by permitting individuals to opt out of being targeted with app-based adverts, disrupting the ability of app-based services such as Facebook and Snap to monetize their business.

    Any response to mitigate the ramifications of these changes will be a slow slog for Facebook, which must now rebuild its targeting and optimization systems from the ground up to function with more patchy consumer data – a process that could take several years.

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