Facebook has reported a strong finish to 2020, but warned of “cross currents” throughout the new year which could hurt its advertising business.
The social media giant reported advertising revenue of US$27.2 billion in the fourth quarter of 2020, up 31% year-on-year. Facebook’s “other” revenue was US$885 million for the quarter, up 156%.
Daily active users were 1.84 billion on average for December, up 11%. However, daily active users in the US and Canada, where TikTok is booming, experienced another quarterly decline, falling to 195 million after hitting 198 million in the second quarter.
"Facebook's strong quarterly results weren't surprising; the company was well positioned to benefit from the shift toward ecommerce that's currently taking place across the digital landscape,” says eMarkter principal analyst at Insider Intelligence Debra Aho Williamson.
“In addition, its massive user base is still highly attractive to advertisers. We also continue to believe that Instagram is playing an outsize role in Facebook's overall success. Last year Instagram accounted for about 36% of Facebook's total worldwide ad revenue and nearly half (49%) of Facebook's total US ad revenue."
In his statement, chief financial officer David Wehner says that while Facebook benefited from the rise of ecommerce during the pandemic and consumers’ shift to products and away from services, a reversal in either of these trends could hurt its advertising revenue growth this year.
Wehner also referred to the impact of platform changes, such as Apple's iOS 14, and “evolving regulatory landscape”.
“While the timing of the iOS 14 changes remains uncertain, we would expect to see an impact beginning late in the first quarter,” he says.
“There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress.”
Facebook is also facing the news media bargaining code in Australia, which will force it to pay eligible news publishers for their content.
Both Facebook and Google have pushed strongly against the current code, with Facebook saying it will remove all news content for local users if the code is passed in its current form.
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