Why Facebook Is Warning Against The Apple Impact On Revenue In Coming Quarters

Social media giant Facebook Inc. FB on Wednesday reported first-quarter results that beat the average analyst estimate but warned that revenue growth could “significantly decelerate” later this year.

What Happened: Facebook said in its earnings report that it continues to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably Apple Inc.’s AAPL recently launched iOS14.5 update, which it expects to begin having an impact in the second quarter.

The company added it expects year-over-year total revenue growth rates to significantly decelerate sequentially in the third and fourth quarters of 2021 as it laps periods of increasingly strong growth.

Facebook CEO Mark Zuckerberg said his company will continue to invest aggressively in newer areas like augmented and virtual reality, commerce and the creator economy.

See Also: Apple To Face EU Antitrust Music Based On Spotify Complaint This Week: Report

Why It Matters: Facebook’s first-quarter revenues surged 48% year-over-year to $26.17 billion and beat analyst estimates as the digital advertising industry boomed during the pandemic. Advertising revenue increased 45% year-over-year, with the average revenue per ad up 30% year-over-year and a 12% year-over-year increase in the number of ads delivered.

Facebook, the second-largest recipient of advertisement revenues after Alphabet Inc. GOOG GOOGL, has bitterly criticized Apple’s privacy updates to its iOS 14 operating system for months, saying that the changes would hurt its business and also harm small businesses.

The privacy rule changes will result in user permission becoming mandatory for displaying targeted advertisements, according to Apple.

According to a report by Reuters, Facebook is now working on including an affiliate program to let content creators earn money from recommending products on Instagram. The move is part of the company’s push to add shopping and e-commerce features within Facebook and Instagram to generate more revenue.

It was reported on Monday that Facebook and Spotify Technology SA SPOT launched a new mini player for Facebook users to stream Spotify through the Facebook app on iOS or Android.

Price Action: Facebook shares closed almost 1.2% higher in Wednesday’s regular trading session at $307.10 and further gained almost 6.2% to $326.00 in the after-hours session.

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