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Facebook Q2 earnings preview: Online ad spending recovery set to drive sales acceleration

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Facebook (FB) is poised to report second-quarter earnings after market close on Wednesday, with the recovery across the internet advertising industry set to help lift the social media company’s results. 

Here are the main metrics Facebook is expected to post, compared to consensus estimates compiled by Bloomberg:

  • Revenue: $27.86 billion expected vs. $18.69 billion Y/Y 

  • Adjusted earnings per share: $3.53 expected vs. $2.29 Y/Y 

Much stronger-than-expected earnings results from peer ad-driven internet companies Snap (SNAP) and Twitter (TWTR) last week raised the bar for Facebook’s second-quarter results. Both the parent company of Snapchat and Twitter handily exceeded quarterly user and sales growth, pointing to solid user retention on the platforms even as in-person activities returned and vied for attention. Their sales and earnings beats suggested monetization of these users was also improving. 

But with more than 10 million active advertisers, Facebook remains a reigning leader in the online advertising space, and it has grown strongly over the course of the pandemic even as many businesses trimmed their marketing budgets. Revenue for the second quarter is expected to grow 49% over last year to nearly $27.9 billion, marking the fastest growth rate since early 2018. 

And that’s set to come even as user growth decelerates for the massive platform, with monthly active users across all Facebook properties including Instagram and WhatsApp expected to increase 11.2% over last year to 3.9 billion. That compares to a 13.8% growth rate in the same quarter last year, and a 15.4% rate during the first quarter.

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Bangkok Thailand - August 31 2017 Facebook App on iPhone with computer laptop background closeup male hand hold social network on smart device concept.

Bangkok Thailand – August 31 2017 Facebook App on iPhone with computer laptop background closeup male hand hold social network on smart device concept.

“We see three core catalysts in 2021: Rising Mobile advertising revenue, Video advertising and Instagram monetization,” Cowen analyst John Blackledge wrote in a note. “We expect Instagram to continue to increase its user count in 2021 and beyond, which should serve as a longer-term catalyst.”

For the second quarter, one of the key risk areas investors will be watching will be about how Facebook has navigated Apple’s recent ID for Advertisers (IDFA) software update. This update allows users to opt out of tracking in apps on iOS devices — a move which Facebook has suggested would decrease developers’ ability to monetize ads. Users have implemented the update over the past several months, though some analysts have suggested the impact to Facebook’s ad-centric business will be smaller than previously feared. 

“We acknowledge concerns around iOS14.5+ changes have ramped of late, and we expect it to be a key topic on the call, but we ultimately expect only modest impact to growth,” JPMorgan analyst Doug Anmuth wrote in a note. “Our checks suggest large platforms are best positioned to manage through IDFA/ATT [Ad Tracking Transparency], and we remain confident in FB’s ability to adapt. As we’ve seen in the past, FB’s large base of 10M+ advertisers creates high auction density, and even if select marketers reduce their spending on the platform, others will likely step into the auction.”

Updates on Facebook’s commerce ambitions will also be closely monitored, as the company continues to invest heavily in building out its payments and shopping experiences across each of its core Facebook, Instagram and WhatsApp platforms. Facebook CEO Mark Zuckerberg acknowledged the company’s commerce offerings like Facebook Marketplace and Instagram Shopping have become increasingly important as the pandemic accelerated the consumer shift to making purchases online, and said last quarter that building out a full-featured commerce platform across all the company’s services will be “a multiyear journey.” 

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“Shopping remains a big focus as FB’s ability to improve ad conversion and monetize organic posts with shopping capabilities could help offset tougher 2H21 revenue comps,” Bank of America analyst Justin Post said in a note. “Longer term, messaging remains a potentially large revenue drive and Facebook has seemingly been more constructive on AR/VR [augmented reality/virtual reality] traction, plus time spent on Instagram and IG Reels seems strong.” 

This post will be updated with the results of Facebook’s earnings results Wednesday after market close. Check back for updates.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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Updating Special Ad Audiences for housing, employment, and credit advertisers

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On June 21, 2022 we announced an important settlement with the US Department of Housing and Urban Development (HUD) that will change the way we deliver housing ads to people residing in the US. Specifically, we are building into our ads system a method designed to make sure the audience that ends up seeing a housing ad more closely reflects the eligible targeted audience for that ad.

As part of this agreement, we will also be sunsetting Special Ad Audiences, a tool that lets advertisers expand their audiences for ad sets related to housing. We are choosing to sunset this for employment and credit ads as well. In 2019, in addition to eliminating certain targeting options for housing, employment and credit ads, we introduced Special Ad Audiences as an alternative to Lookalike Audiences. But the field of fairness in machine learning is a dynamic and evolving one, and Special Ad Audiences was an early way to address concerns. Now, our focus will move to new approaches to improve fairness, including the method previously announced.

What’s happening: We’re removing the ability to create Special Ad Audiences via Ads Manager beginning on August 25, 2022.

Beginning October 12th, 2022, we will pause any remaining ad sets that contain Special Ad Audiences. These ad sets may be restarted once advertisers have removed any and all Special Ad Audiences from those ad sets. We are providing a two month window between preventing new Special Ad Audiences and pausing existing Special Ad Audiences to enable advertisers the time to adjust budgets and strategies as needed.

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For more details, please visit our Newsroom post.

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Impact to Advertisers using Marketing API on September 13, 2022

For advertisers and partners using the API listed below, the blocking of new Special Ad Audience creation will present a breaking change on all versions. Beginning August 15, 2022, developers can start to implement the code changes, and will have until September 13, 2022, when the non-versioning change occurs and prior values are deprecated. Refer below to the list of impacted endpoints related to this deprecation:

For reading audience:

  • endpoint gr:get:AdAccount/customaudiences
  • field operation_status

For adset creation:

  • endpoint gr:post:AdAccount/adsets
  • field subtype

For adset editing:

  • endpoint gr:post:AdCampaign
  • field subtype

For custom audience creation:

  • endpoint gr:post:AdAccount/customaudiences
  • field subtype

For custom audience editing:

  • endpoint gr:post:CustomAudience

Please refer to the developer documentation for further details to support code implementation.

First seen at developers.facebook.com

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Introducing an Update to the Data Protection Assessment

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Over the coming year, some apps with access to certain types of user data on our platforms will be required to complete the annual Data Protection Assessment. We have made a number of improvements to this process since our launch last year, when we introduced our first iteration of the assessment.

The updated Data Protection Assessment will include a new developer experience that is enhanced through streamlined communications, direct support, and clear status updates. Today, we’re sharing what you can expect from these new updates and how you can best prepare for completing this important privacy requirement if your app is within scope.

If your app is in scope for the Data Protection Assessment, and you’re an app admin, you’ll receive an email and a message in your app’s Alert Inbox when it’s time to complete the annual assessment. You and your team of experts will then have 60 calendar days to complete the assessment. We’ve built a new platform that enhances the user experience of completing the Data Protection Assessment. These updates to the platform are based on learnings over the past year from our partnership with the developer community. When completing the assessment, you can expect:

  • Streamlined communication: All communications and required actions will be through the My Apps page. You’ll be notified of pending communications requiring your response via your Alerts Inbox, email, and notifications in the My Apps page.

    Note: Other programs may still communicate with you through the App Contact Email.

  • Available support: Ability to engage with Meta teams via the Support tool to seek clarification on the questions within the Data Protection Assessment prior to submission and help with any requests for more info, or to resolve violations.

    Note: To access this feature, you will need to add the app and app admins to your Business Manager. Please refer to those links for step-by-step guides.

  • Clear status updates: Easy to understand status and timeline indicators throughout the process in the App Dashboard, App Settings, and My Apps page.
  • Straightforward reviewer follow-ups: Streamlined experience for any follow-ups from our reviewers, all via developers.facebook.com.

We’ve included a brief video that provides a walkthrough of the experience you’ll have with the Data Protection Assessment:

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The Data Protection Assessment elevates the importance of data security and helps gain the trust of the billions of people who use our products and services around the world. That’s why we are committed to providing a seamless experience for our partners as you complete this important privacy requirement.

Here is what you can do now to prepare for the assessment:

  1. Make sure you are reachable: Update your developer or business account contact email and notification settings.
  2. Review the questions in the Data Protection Assessment and engage with your teams on how best to answer these questions. You may have to enlist the help of your legal and information security points of contact to answer some parts of the assessment.
  3. Review Meta Platform Terms and our Developer Policies.

We know that when people choose to share their data, we’re able to work with the developer community to safely deliver rich and relevant experiences that create value for people and businesses. It’s a privilege we share when people grant us access to their data, and it’s imperative that we protect that data in order to maintain and build upon their trust. This is why the Data Protection Assessment focuses on data use, data sharing and data security.

Data privacy is challenging and complex, and we’re dedicated to continuously improving the processes to safeguard user privacy on our platform. Thank you for partnering with us as we continue to build a safer, more sustainable platform.

First seen at developers.facebook.com

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Resources for Completing App Store Data Practice Questionnaires for Apps That Include the Facebook or Audience Network SDK

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Resources for Completing App Store Data Practice Questionnaires for Apps That Include the Facebook or Audience Network SDK

First seen at developers.facebook.com

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