Apple’s privacy changes are definitely on Facebook’s mind

Facebook appears to be bracing itself over Apple’s recent privacy change that could affect the social media giant’s bottom line.

Apple’s latest software update, iOS 14.5, and its privacy change giving users more control and transparency about who’s tracking them has the social media behemoth concerned, even after posting impressive first-quarter earnings with a 10% growth in monthly users. 

It’s those ads – that sometimes even feel eerily targeted –  that bring Facebook the lion’s share of its revenue, and any limited access to the prized data – your data – could hamper Facebook’s U.S. digital advertising, estimated to be about $40 billion, according to eMarketer.

Facebook is forecasting that these “increased ad targeting headwinds in 2021” will start to hit revenue growth as soon as the second quarter and into the third and fourth quarters. Still, the company was pleased with a stunning increase in revenue with a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered, said Chief Financial Officer Dave Wehner.

Facebook’s challenge going forward, as Chief Operating Officer Sheryl Sandberg stated, is explaining to the people who use the platform – and who may shut off the pipeline to their data – is to convince them of the value to them to keep allowing themselves to be tracked. On the other end, she told analysts during an earnings call, Facebook is doing a huge amount of work with its advertising  customers, especially small businesses dependent on the platform to make money, to help mitigate the changes by having access to fewer user data.

“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 can be privacy-protected,” Sandberg said.

“Small businesses don’t have to understand the alphabet soup of acronyms they will need to comply with,” Sandberg continued. “But they do need to have the confidence so they can still use our tools to reach the people who want to buy what they are selling in a privacy-safe way.”

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Wehner later said that, while it’s still early to gauge what impact Apple’s operating system will have on Facebook’s bottom line, “We don’t think this closed approach is the best from an innovation perspective.”

However, Facebook has shown to be resilient when faced with challenges, eMarketer analyst Debra Aho Williamson said Wednesday. She’s confident that the social media platform will come up with new advertising products and measurement solutions to blunt any impact.

“When changes come, the company seems to adapt,” Williamson said. “Facebook has a precedent of staring things down when things look tough and becoming a winner.”

Otherwise, Facebook continues to be streaky when it comes to beating analysts’ expectations. The company posted another strong report with revenue of $26.17 billion during its 2021 fiscal first quarter compared to analysts’ estimates of $23.67 billion. That’s a 48% increase in revenue from the same period a year ago, Sandberg said. She said the increase comes as more businesses make the transition to operate online during the pandemic.

Also, Facebook’s net income grew to $9.5 billion, from $4.9 billion a year ago, a 94% increase. Facebook also said it has 2.85 billion monthly users, close to what analysts expected. That’s a 10% increase from this time a year ago and a 1 million user increase from three months ago.

“We had a strong quarter as we helped people stay connected and businesses grow,” Facebook CEO Mark Zuckerberg said. “We will continue to invest aggressively to deliver new and meaningful experiences for years to come, including in newer areas like augmented and virtual reality, commerce, and the creator economy.”

During Wednesday’s earnings call, Zuckerberg also touted Facebook’s growing e-commerce strategy as he said more than 1 billion people visit the platform’s Marketplace service each month. He said e-commerce has become “a lot more important as the pandemic has accelerated a broader shift towards businesses moving online.”

Facebook’s stock price was up more than 6% in after-hours trading Wednesday.

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