Facebook’s Q1 Revenue Beats Expectations, Thanks to Ad Business
Analysts anticipated huge numbers from Facebook for the first three months of the year, and it didn’t disappoint. In fact, according to the the social media giant’s figures posted Wednesday, the company just had the best first quarter in its history, with $26.1 billion in revenue.
Facebook’s strong performance follows that of Google on Tuesday, which also reported the best first quarter in its history.
Revenue performance at Facebook, which beat expectations of $23.67 billion by a notable margin of almost $3 billion, showed growth of 48 percent over the $17.7 billion in the same period in 2020. Net income of $3.30 a share amounted to $9.5 billion, easily topping expectations of $2.33 a share, and soared past last year’s $4.9 billion by 94 percent.
Naturally, Wall Street was thrilled, sending shares up more than 6 percent in after-hours trading.
But not all of the news was positive. According to Facebook’s numbers, its user base barely budged from quarter to quarter. The company ended 2020 with 195 million daily active users across the U.S. and Canada, and the figure has apparently plateaued, while growth in Europe ticked up slightly from 308 million in the fourth quarter of 2020 to 309 million in the first quarter of 2021.
It’s not entirely surprising — when so much of the world is sequestered and already living online, it may be harder to grow the audience even further. But that audience appears to be more valuable than ever for Facebook. The company credited its year-over-year revenue jump to the surge in its advertising business, including a 12 percent increase in its ad volume and a 30 percent increase in the average price per ad.
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Mark Zuckerberg, Facebook founder and chief executive officer, kicked off the earnings call on Wednesday by saying, “More than 2.7 billion people now use one or more of our apps each day, and more than 200 million businesses use our tools to reach customers, and this has been an intense year, and I am proud that we continue to deliver value for people and businesses around the world.”
He added that the business was doing better than even Facebook imagined, “and this has given us the confidence to increase our investments meaningfully in a few key areas that have the potential to change the trajectory of the company over the long term.”
Those areas are augmented and virtual reality, commerce, business messaging and the creator economy.
Zuckerberg has made no secret of the fact that he’s very bullish on AR/VR — of course, considering Facebook owns VR firm Oculus and has already disclosed that his company is working on a new wearable AR glasses device. He’s also spoken publicly about his views that mixed reality platforms are the future of computing.
“Now I believe that augmented and virtual reality are going to enable a deeper sense of presence and social connection than any existing platform,” he said. “There is going to be an important part of how we will interact with computers in the future, so we’re going to keep investing heavily and building out the best experience this year and this accounts for a major part of our overall R&D budget growth.”
One application of the technology could be to replace the plethora of communication, collaboration and social media tools, from texts and videos to document sharing, in a virtualized meeting. Imagine virtual environments where people feel like friends or colleagues are actually present.
He pointed to the success of Oculus’ Quest 2 headset, which offers high quality without being tethered to a machine. The device continues to be popular even after the holiday season, according to Zuckerberg, though he didn’t share hard numbers on the call.
The company is working on interfaces that improve the ways users interact in the environment, along with a broadening ecosystem of apps, including fitness and social. And in an apparent jab at Apple, the CEO said Facebook is working on a “much more open model of app store than what’s currently available on phones today.”
Commerce is another critical priority for Facebook, he emphasized, sharing a few numbers: Marketplace sees more than one billion monthly visitors and Shops, which launched last year on Facebook and Instagram, now features more than one million monthly active shops and more than 250 million monthly visitors.
For WhatsApp, which saw a few updates over the past year covering carts and catalogues, he promised improvements to build out a broader infrastructure for commerce that includes “everything from payments to customer service and support.” WhatsApp payments, which is now live in India, will soon launch in Brazil, as well.
As for WhatsApp business messaging, companies will be able to put the “Click to WhatsApp” feature directly in WhatsApp business ads.
The tech executive also noted that his company’s acquisition deal for CRM platform Kustomer is going through regulatory approvals, but when that’s done, Facebook plans to offer businesses “a native way to manage their customer relationships on our platforms.”
Meanwhile, Zuckerberg pledged to boost customer support for Facebook business-oriented products.
“Now I want to be clear that we have a long way to go to build out a full featured commerce platform across our services, and this is a multiyear journey, but I am very committed to getting there,” he said. “This modern commerce system is going to bring together a number of areas where we either already have strong offerings, like in ads, community tools and messaging, with areas like Shops and business messaging and payments that we are focused on-ramping up now.”
He called customer support “the next pillar” of Facebook’s work on trust and safety, as an extension of its efforts to improve content moderation and privacy.
The next talking point, the creator economy, has everything to do with Facebook’s foundation as a social media platform. Recently, the company revealed that it’s developing social audio features, akin to Clubhouse. It also partnered with Spotify to launch a music player in the app.
Now Zuckerberg is teasing that this is only the beginning.
“So we also need to connect these experiences with easy options for monetization, whether that’s subscriptions, tipping or enabling creators to give product recommendations and enable commerce and with Instagram and Facebook,” he added. “We have a unique ability to bring creators and commerce together and we will share more on that later this year.”
The big question on the minds of Facebook watchers is how the company will fare in the face of Apple’s latest privacy update for iPhone users. A new feature in iOS 14.5 makes it simpler and more obvious for users to see and shut down user tracking across apps.
Chief operating officer Sheryl Sandberg acknowledged the issue on the call and said Facebook is preparing for the changes.
“We’re rebuilding meaningful elements of our ad tech, so that our system continues to perform when we have access to less data in the future,” she said, “and we’re part of long-term collaborations with industry bodies like the W3C [the World Wide Web Consortium] on initiatives like privacy-enhancing technologies that provide personalized experiences while limiting access to people’s information.
“It’s also on us to keep making the case that personalized advertising is good for people and businesses, and to better explain how it works, so that people realize that personalized ads are privacy protective,” she added.
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