Facebook has cautioned investors about a significant slowdown in revenue growth for the third and fourth quarters of 2021, leading to a 5% drop in the social media giant’s shares during extended trading. Although Facebook exceeded Wall Street’s expectations for quarterly revenue, the company’s warning weighed heavily on its recent accomplishments.

The deceleration in revenue growth takes place despite a rise in advertising spending as businesses strive to establish a robust digital presence and attract consumers who are increasingly investing time and money online. Facebook reported having 2.90 billion monthly active users, marking a 7% increase compared to the same period last year. However, this figure falls short of analysts’ projections of 2.92 billion and represents the slowest growth rate in at least three years.

Facebook attributes part of this slowdown to Apple’s recent privacy changes, which now require iPhone app developers to obtain users’ permission for collecting specific data for advertising purposes. The company believes that these modifications will impact its ability to target ads, thereby affecting ad revenue in the third quarter. Facebook has been publicly opposing Apple’s privacy requirements, arguing that they will impede its business and disadvantage small companies reliant on personalized advertising.

In the second quarter, total revenue for Facebook, mainly composed of ad sales, reached $29.08 billion, surpassing analysts’ estimates of $27.89 billion. Advertising revenue also soared by 56% to $28.58 billion. The demand for digital ads escalated during the pandemic as consumers shifted their shopping habits to online platforms. Consequently, numerous businesses turned to social media platforms, including Facebook, to establish online stores and marketplaces.

However, Facebook anticipates a substantial deceleration in year-on-year total revenue growth rates for the third and fourth quarters compared to periods of robust growth. Chief Financial Officer Dave Wehner clarified that the company expects slower growth in a sequential manner.

Concurrently, Facebook faces not only economic hurdles but also mounting pressure from regulators and lawmakers globally. The U.S. Federal Trade Commission has until August 19 to refile its antitrust complaint against the company. Furthermore, a coalition of states has announced their intentions to challenge the dismissal of their lawsuit against Facebook. These ongoing legal issues compound the company’s broader challenges.

Despite the obstacles, Facebook briefly achieved a milestone last month, attaining a market capitalization of $1 trillion for the first time. Nevertheless, this momentary triumph was short-lived due to persistent concerns and issues surrounding the company. The future growth and performance of Facebook will be closely monitored, particularly with regards to its ad targeting system, which plays a crucial role in monetizing its applications.

Useful links:
U.S. Federal Trade Commission
Facebook’s official website