Facebook cashes in on Covid lockdowns

Facebook has reported a surge in revenue having benefited from a rise in digital advertising as people spend more time and money online during the pandemic.

Quarterly revenues for the three months to the end of June rose by 56 per cent to $29.1 billion, beating analysts’ expectations of $27.9 billion.

However, the giant social media group warned that revenue growth in the third and fourth quarters was likely to “decelerate significantly”, sending its shares down by about 4 per cent in after-hours trading. Shares in Facebook have advanced by 36 per cent this year.

David Wehner, the company’s chief financial officer, said that advertising revenue growth in the quarter had been driven by a 47 per cent year-on-year increase in the average price per advert and a 6 per cent increase in the number of ads delivered.

However, he warned that changes including Apple’s new privacy controls, which ban apps and advertisers from collection activity about users without their permission, would have a greater impact on business in the third quarter.

The results were the latest in a week of bumper second-quarter earnings reports by Big Tech. Apple, Alphabet and Microsoft previously had reported combined post-tax profits of $57 billion, double the previous year.

Facebook was created by Mark Zuckerberg in his Harvard university dorm 17 years ago and is now a $1 trillion company. It owns the social network of the same name, WhatsApp, the messaging service, and Instagram, the video-sharing app. The company has 2.9 billion monthly users and makes the majority of its money from selling targeted digital advertising. It is investing heavily in new tools for video chatting, virtual reality, audio and podcasting features and online shopping.

Monthly active users increased by 7 per cent year-on-year to 2.9 billion. Monthly users of its family of applications rose 12 per cent to 3.5 billion. Net income rose to $10.39 billion, or $3.61 a share, from $5.18 billion, or $1.80 per share a year earlier. Analysts had expected a profit of $3.03 per share.

Zuckerberg, 37, is planning for the company’s future growth, with initiatives including “building the next computing platform” that he calls “the metaverse”. He said on Wednesday: “We had a strong quarter as we continue to help businesses grow and people stay connected.”

The results came as Facebook is facing legal and regulatory challenges amid concerns about its market influence. New York and other states in America filed a notice on Wednesday saying that they would fight the dismissal of an antitrust lawsuit that they had launched against Facebook in an appeals court. The complainants had sought to force Facebook to sell Instagram and WhatsApp.

Letitia James, New York’s attorney-general, said: “We filed this notice of appeal because we disagree with the court’s decision and must hold Facebook accountable for stifling competition, reducing innovation and cutting privacy protections.”

When the lawsuit was dismissed in June, James Boasberg, a federal judge, said they had waited too long to challenge Facebook’s acquisitions of Instagram and WhatsApp, in 2012 and 2014, respectively. Facebook said that it agreed with the court’s decision and “looked forward” to defending the ruling in the appeal court.