Facebook's Zuckerberg Sees Battles Escalating With Apple on Privacy, Messaging -- 3rd Update
January 27 2021 - 8:43PM
Dow Jones News
By Sarah E. Needleman
Facebook Inc. posted record revenue and profit in the fourth
quarter while warning of challenges including growing friction with
Apple Inc., which Chief Executive Mark Zuckerberg said is
increasingly one his company's biggest competitors.
Apple and Facebook have tussled in recent years on issues
ranging from data collection to app-store fees, though the latest
flashpoint is centered on the iPhone maker's plan to enable users
to opt out of third-party apps from collecting certain data -- a
move Facebook has said could hamper its ad-targeting
capabilities.
As Facebook has grown to become the world's largest social
network, with roughly 1.85 billion daily users in the latest
quarter, it has become an online advertising behemoth through its
ability to harness the reams of information users share and help
businesses to reach narrow bands of users based on their internet
behavior.
On an earnings call Wednesday with analysts, Mr. Zuckerberg
uncharacteristically lambasted Apple during his opening remarks,
saying the iPhone maker has made misleading claims about user
privacy and that the new rules around advertiser tracking will hurt
small businesses. Apple has defended itself, saying it doesn't plan
to prohibit such tracking but that it will simply require app
makers to obtain users' permission to do so. The initiative has
rankled the broader advertising community.
Mr. Zuckerberg also said Apple and Facebook are likely to
collide as competitors on other fronts in the years ahead,
including in categories such as immersive computing as well as
messaging. He described Apple's iMessage as the largest U.S.
messaging platform by default because it comes pre-installed on
iPhones.
"Apple may say they're doing this to help people," he said about
the iOS 14 plan. "But the moves clearly track their competitive
interests."
Facebook executives said they expect Apple to roll out the
operating system changes starting in the current quarter and weigh
on what was expected to be a stronger period for advertising
compared with the early months of the pandemic in 2020.
In the latest quarter, online holiday shopping and increased use
of the company's platforms during the pandemic drove
stronger-than-expected growth in Facebook's ad business. It posted
revenue of $28.07 billion, up from $21.08 billion in the final
quarter of 2019. Profit rose 52% to $11.22 billion, or $3.88 a
share. Both measures exceeded analysts' projections.
Facebook's showing in digital advertising during the final
months of 2020 could bode well for Google parent Alphabet Inc.,
Pinterest Inc., Snap Inc. and Twitter Inc., which all are due to
release their quarterly financial reports next month.
Facebook has been in a yearslong push to position its platforms
as a must-use for large advertisers to reach its billions of users
world-wide but also as a home for small businesses to engage with
customers and for individual sellers to market their goods. Revenue
from the category that 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 anticipates a
more permanent shift to digital advertising for such firms. "I have
an expectation that the majority will stick around."
Facebook said it was adding up to $25 billion to its existing
stock-buyback program. Shares in the company declined 2% in
extended trading. Facebook's shares have lagged behind the Nasdaq
Composite Index over the past three months.
The latest results are also unlikely to quell concerns among
critics with the parent of Facebook, Instagram and WhatsApp and the
market power it holds. The company 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.
Facebook is grappling with other challenges. Last month the
Federal Trade Commission and 46 states filed antitrust lawsuits
against the company, 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.
Mr. Zuckerberg and other company executives on the call didn't
mention former President Donald Trump, who was banned earlier this
month from Facebook and Instagram after he made posts encouraging
protests at the U.S. Capitol that led to a deadly riot. Facebook
recently referred the matter to an independent committee to
determine whether Mr. Trump should be allowed back.
The Facebook chief said the company is considering steps that
could reduce the amount of political content that appears in users'
news feed but that it wants to continue enabling people to engage
in political groups and discussions if they want.
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. On the earnings call,
Mr. Zuckerberg said the company's short-form video feature
Instagram Reels is gaining traction with users and that Oculus
headsets were a popular holiday gift item.
Facebook's e-commerce play could yield big benefits in the long
run, analysts say. Instagram Shopping and Reels and 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.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
January 27, 2021 20:28 ET (01:28 GMT)
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