Facebook's Ad Business Lifts Social Media Giant to Record Revenue -- 2nd Update
January 27 2021 - 5:54PM
Dow Jones News
By Sarah E. Needleman
Facebook Inc. posted record revenue and profit in the fourth
quarter as online holiday shopping and increased use of the
company's platforms during the pandemic drove a surge in its ad
business.
However, the social-media giant warned Wednesday that
uncertainty from regulatory probes and the potential for weaker
ad-targeting capabilities related to Apple Inc.'s iOS 14 operating
system could create business headwinds.
Facebook posted revenue of $28.07 billion, up from $21.08
billion in the final quarter of 2019. Facebook's profit rose 52% to
$11.22 billion, or $3.88 a share. Both measures far exceeded
analysts' projections.
The company has pushed for years to make its platforms essential
both for large advertisers to reach its billions of users
world-wide and for small businesses and individual sellers to
connect with customers and market their goods. Revenue from the ad
category, which includes Facebook Marketplace and the company's
virtual-reality business, more than doubled in the latest quarter
from a year earlier to $885 million.
"This means that small businesses showed up in the fourth
quarter," said AB Bernstein analyst Mark Shmulik, who foresees such
firms shifting toward digital advertising more permanently. "I have
an expectation that the majority will stick around."
Facebook also said Wednesday that it was adding up to $25
billion to its existing stock buyback program. Shares in the
company, which initially showed declines after the report was
released, were up less than 1% in extended trading. Facebook's
shares have lagged behind the Nasdaq Composite Index over the past
three months.
The latest results are also likely to raise concerns among
critics of the market power wielded by the parent company of
Facebook, Instagram and WhatsApp. The tech giant said 2.6 billion
people a day, or roughly one in three world-wide, used one of its
platforms in the holiday quarter.
Still, Facebook's daily users in the U.S. and Canada fell for a
second consecutive quarter to 195 million, which eMarketer analyst
Debra Aho Williamson attributed to mounting competition from rival
social networks. People in those markets "are starting to move
their social time and engagement elsewhere," she said, citing
TikTok as a likely example.
Last month the Federal Trade Commission and 46 states filed
antitrust lawsuits against Facebook, accusing it of buying and
freezing out small startups to choke competition. Facebook has
disputed claims presented in the lawsuits, describing them as
revisionist history and defended its acquisitions as good for
competition, advertisers and consumers.
The company has also been criticized for its decision to
indefinitely ban former President Donald Trump from Facebook and
Instagram after he made posts encouraging supporters' protests at
the U.S. Capitol that led to a deadly riot on Jan. 6. The tech
giant recently referred the matter to an independent committee to
determine whether Mr. Trump should be allowed back.
Facebook also said Wednesday that it was adding up to $25
billion to its existing stock buyback program. Shares in the
company, which have lagged behind the Nasdaq Composite Index over
the past three months, fell in extended trading Wednesday.
Analysts have been looking for signs that Facebook is making
progress in efforts to expand its business beyond advertising in
areas such as e-commerce and virtual reality.
Facebook's foray into e-commerce could yield big benefits in the
long run, analysts say. Instagram Shopping and Reels along with
Facebook Marketplace could be responsible for $3 billion of
additional revenue for the company this year, according to a recent
note from Morgan Stanley. The note cited a survey that found about
a third of Americans use Shopping and Reels monthly while more than
half use Marketplace.
Facebook is the first U.S. social-media company to report
earnings for the most recent quarter. Snap Inc. and Twitter Inc.,
which also deactivated Mr. Trump's accounts, are scheduled to
release their quarterly financial reports next month. With all
three, analysts are looking for indications of whether banning the
former president has reduced user engagement, though early data
from analytics firms show no substantial changes in daily users or
time spent on the platforms' websites and apps.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
January 27, 2021 17:39 ET (22:39 GMT)
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