The business of Facebook is booming, but the good times may not last.
Facebook (FB) reported revenue of nearly $29.1 billion for the three months ended June 30, up 56 percent from the same period last year, when online advertising was hit by Covid-19 and businesses struggled. In addition, the company’s quarterly profit more than doubled to nearly $10.4 billion, far exceeding analysts’ expectations of $8.7 billion.
However, CFO David Wehner said in a statement accompanying the earnings report that the outlook for the rest of 2021 is not so bright.
Wehner said that “regulatory and platform changes” could slow sales growth, citing Apple’s recent iOS app tracking rules as an example. According to him, these changes, which took effect in April, will have a bigger impact on Facebook’s business in the third quarter than they did in the second.
Following the earnings report, Facebook’s stock dropped nearly 4% in after-hours trading.
Users must give explicit permission for apps to track their behavior and sell their personal data, such as age, location, spending habits, and health information, to advertisers in Apple’s (AAPL) iOS 14.5 software update. Facebook, which makes nearly all of its money from advertising, has fought back hard against the changes, warning investors last year that many users opting out of tracking could hurt the company’s business.
Facebook is also being scrutinized by regulators. A slew of new antitrust bills proposed by House lawmakers last month target the company and other tech behemoths. And the company had a tense exchange with the White House recently, after President Joe Biden claimed that health misinformation on social media platforms is “killing people,” though he later backtracked slightly.
On Wednesday, a small group of protestors lined the street in front of Facebook’s Washington, D.C. headquarters with body bags labeled with “disinformation kills” tags. Facebook announced a collaboration with the Digital Health Lab at Meedan, a global technology nonprofit, on Tuesday to help fact checkers spot health misinformation.
Despite the scrutiny, Facebook’s ambitions and reach continue to expand. During the third quarter, Facebook had 2.9 billion monthly active users, up 7% from the previous quarter.
On a conference call with analysts on Wednesday, Facebook CEO Mark Zuckerberg lauded the company’s achievements in key areas like creators and e-commerce, as well as teasing a new area of focus that he hopes will redefine Facebook.
“In the coming years, I expect people will transition from seeing us primarily as a social media company to seeing us as a metaverse company,” Zuckerberg said on the call.
The “metaverse” is a collection of augmented and virtual reality technologies that would allow people to interact in three-dimensional virtual worlds over the internet. Zuckerberg stated that the company is investing in developing tools and experiences for metaverse users, both software and hardware, and that the metaverse will be the “successor to the mobile internet.”
However, because of the metaverse, Zuckerberg believes it will be some time before Facebook makes a profit.