Facebook ad revenue boosted by commerce uptick

Facebook: posted 22% rise in ad revenue
Facebook: posted 22% rise in ad revenue

Co-founder and CEO Mark Zuckerberg said Facebook benefits from people and businesses 'relying' on its platforms to stay connected and make money during Covid-19.

Facebook beat analyst expectations in its third quarter results, posting a 22% annual jump in revenue as it continued to reap the benefits of a pandemic-induced acceleration of online commerce.

Ad revenue (which represents 98.5% of total revenue) rose 22% year on year to $21.22bn (£1.6m) for the three months ended September 30.

In the earnings release, chief financial officer David Wehner noted that advertising demand has increased as a result of an acceleration in the shift of commerce from offline to online brought on by the Covid-19 pandemic.

Online commerce is Facebook's largest ad vertical, Wehner said, and fourth quarter ad revenue is expected to grow at a larger rate in Q4 as a result of the holiday season.

Co-founder and chief executive Mark Zuckerberg said the network's strong quarter comes as "people and businesses continue to rely on our services to stay connected and create economic opportunity during these tough times".

Facebook's "other" revenue, which is revenue primarily derived from the sale of hardware such as Oculus and Portal, dropped by 7% in the quarter to $249m. This is expected to be reversed in Q4 as a result of strong Oculus Quest 2 orders.

Globally, Facebook's daily and monthly active users continued to grow at a steady rate of 12% year-on-year. Daily active users were 1.82 billion on average for September 2020, while monthly active users were 2.74 billion.

However, users in the US and Canada declined by a marginal 2 million (1% decline) from the second quarter, which was "elevated due to the impact of the Covid-19 pandemic", Wehner noted in the earnings release.

Facebook expects users in the US and Canada to be flat or "slightly down" in Q4 as well. Asia-Pacific continued to record the strongest user growth, with daily active users up 4% quarter-on-quarter to 727 million, and monthly active users up 2% to 1.17 billion.

Users on Facebook's family of apps, which includes Instagram, Messenger and WhatsApp, increased by 15% year-over-year to 2.54 billion daily users, and by 14% to 3.21 billion monthly users.

During a year in which many businesses have been forced to make mass redundancies to offset the impact of Covid-19, Facebook's headcount grew by 32% year-on-year to 56,653 as of September 30.

Potential headwinds that could affect Facebook in 2021 are targeting and measurement challenges as a result of platform changes such as on Apple iOS 14, as well as those from the evolving regulatory landscape, Wehner noted.

The company is also "closely monitoring" the potential impact of European regulations around transatlantic data transfers.

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