Facebook Warns Of 2021 “Cross Currents”, “Uncertainty”; Daily Active Users At 1.84B

Facebook reported strong fourth-quarter financials but spooked markets a bit by warning of advertising headwinds this year — some created by Apple as it mulls stricter privacy controls that could eat into Facebook ad sales.

Revenue was $28.1 billion, up 33%. Net profit hit $11.2 billion, or $3.94 a share, up 53% — both beating Wall Street forecasts. The company cited two broad economic trends — an ongoing shift to online commerce and a shift in consumer demand towards products and away from services.

“We believe these shifts provided a tailwind to our advertising business in the second half of 2020 given our strength in product verticals sold via online commerce and our lower exposure to service verticals like travel. Looking forward, a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth,” the company said.

Daily active users of 1.84 billion were up 11% year-on-year but about flat from the previous quarter. Monthly active users were 2.8 billion.

Family daily and monthly active people — a metric that includes Instagram, Messenger and WhatsApp — were, respectively, 2.6 billion and 3.3 billion at year end.

“We had a strong end to the year as people and businesses continued to use our services during these challenging
times,” said Mark Zuckerberg, Facebook founder and CEO. But, he added, “We continue to face significant uncertainty as we manage through a number of cross currents in 2021.” He also warned of tough comps on advertising in the second half 2021 from the year before.

The giant social media platform cited “significant uncertainty” stemming from the ongoing pandemic.

Questions about last quarter in fact will likely be outnumbered by queries about the year head, including a big one Zuckerberg will hopefully address on an analyst conference call at 5 pm ET — whether banning the former president Donald Trump from the platform in January has reduced user engagement, and if or when it will let the former POTUS back on.

Facebook booted Donald Trump indefinitely after he incited a mob of supporters to storm the Capitol Jan 6 as lawmakers were ratifying President Joe Biden’s electoral victory.

Facebook seems to have deputized a somewhat odd Oversight Board of 40 members from around the world to determine whether to uphold or reverse its content decisions – a sign of just how complicated the role of the powerful social media platform in policing speech has become. It’s the first big one to report in to Wall Street — Twitter and Snap will face similar questions when its their turn in February.

On the business side, there’s considerable interest among investors on how Facebook is monetizing e-commerce and other products — from Facebook Marketplace to Reels, Instagram Shopping and virtual reality – all of which promise to expand its business.

The company faces uncertainty around Apple’s update to its ad tracking policy in iOS 14. Specifically, Apple’s expected rollout of so-called Limited Ad Tracking features would prevent collection of its identifier for advertisers (IDFA), which could impact Facebook’s ad sales. Analysts are split on the possible hit, which could be offset by all the small businesses that have flocked to Facebook during the pandemic. Facebook indicated today it might be problematic, said it expects “to face more significant ad targeting headwinds in 2021. This includes the impact of platform
changes, notably iOS 14, as well as the evolving regulatory landscape. While the timing of the iOS 14 changes 2 remains uncertain, we would expect to see an impact beginning late in the first quarter.”

A looming but more existential threat is that the Biden administration will look at tweaking Section 230, which gives internet platforms legal immunity from content on their platforms and the ability to curate them. Also, Llast month the Federal Trade Commission and 46 states filed antitrust lawsuits against Facebook, alleging it deliberately stifled competition by buying or quashing smaller competitors. The suit wants a breakup of Facebook, Instagram and WhatsApp. Facebook has called the acquisitions part of the normal course of business and good for advertisers and consumers.

Facebook also noted continuing uncertainty around the viability of transatlantic data transfers in light of recent European
regulatory developments. “Like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress,” Zuckerberg said.

Facebook’s stock was down Wednesday ahead of earnings and fell another 6% in after-hours trading when the numbers came out. It subsequently regained ground and is up slightly from the close.  The share gains have been muted for the past several months and investors had been looking for the quarterly numbers to be kind of a reset.

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