July 29, 2021
It was the first warning that the Big Tech revenue rocket may eventually come back to earth. And it came yesterday from Facebook's Mark Zuckerberg, as he warned the pace of revenue growth would "decelerate significantly" in coming quarters.
Partly this just comes from lapping year-ago periods of strong pandemic growth.
Figure 1: Calm before the storm: Results may be good for Facebook - but the sunny weather can't last, says Mark Zuckerberg.
(Source: Tim Bennett on Unsplash)
But there's also the impact of Apple's new privacy policies on Facebook's ad spending, which Zuckerberg warned would have a "greater impact" in the next quarter too.
Many eyes on screens
For all that, its revenues in the second quarter rose by a yearly 56%, topping even the 48% growth in the previous quarter. This is the platform's fastest quarterly growth at any time in the last five years. With $29 billion quarterly revenues, Facebook earns more than $8 a quarter from every one of its users. (Of which it has 2.7 billion worldwide at the moment.)
It's also, maybe unusually for a social media company, turning these revenues into profits at an increasingly fast clip. Profits were $10.4 billion in the second quarter, double a year ago. And they've had a good pandemic, even if President Biden recently on July 17 accused the social media giant of "killing people" by spreading misinformation about vaccines.
On the day of its earnings, activists descended on Facebook's Washington headquarters to demand stronger action against vaccine misinformation on the platform, covering the area in front of the office with body bags reading "disinfo kills." Biden rowed back subsequently, after an unusually strong rebuttal where Facebook showed its users were more likely to be vaccinated, including 85% of its US users.
With self-isolating US adults spending 35 minutes a day on Facebook in 2020, two minutes more than a year before, that adds up to 10,000 extra years of additional collective attention for the platform's advertisers.
Facebook is now "working on cross-app communication" to integrate messaging across its family of applications, and open up messaging APIs, says Zuckerberg. All this has a very big e-commerce tilt. A next phase will be "building out Shops, Marketplace, and business messaging in WhatsApp and Messenger," with "more native commerce experience across our apps," he says.
So if you're a small business on Facebook, you might find it "easier to message customers across our apps from a single interface," adds COO Sheryl Sandberg. And businesses on Instagram "increasingly rely on messaging instead of phone call," so the company is "expanding our Messenger API for Instagram," she says.
Payments and messaging is, Tencent-style, meanwhile getting knitted closer together. WhatsApp payments are available now in Brazil and India, and the platform is "adding new payments features in Messenger in the US," like QR codes, says Zuckerberg.
Senator, we sell ads
Facebook has been able to charge more for ads, as businesses moved shop online. There was a 47% increase in the average price of an ad, compared with a year before. And the number of ads delivered was meanwhile up 6%.
An increase in daily active users, up to nearly 2.9 billion from 2.7 billion a year before, was key here. Video now accounts for almost half the time spent on the platform. But "increased ad targeting headwinds" would come from iOS updates and regulatory changes. On the last point, the new FTC chair, Lina Khan, is a vocal critic and has promised to take action against Big Tech monopolies.
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Democratic Senator Amy Klobuchar has introduced a bill to hold tech companies responsible for vaccine misinformation on their platforms. This would make an exception to the US's Section 230, which has shielded platforms from being sued over most content its users post on their platforms.
Meanwhile, even Facebook eventually goes back to the office, with its US offices reopening fully in October. And it will require its employees coming back to work in its US offices to be vaccinated, says Facebook's vice president of people Lori Goler. Like Google, which announced the same requirement to its staff hours before.
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