Facebook scores earnings beat on retailer advertising; Apple privacy changes loom

(Reuters) – Facebook Inc soundly beat quarterly revenue estimates on Wednesday after heavy holiday advertising by e-commerce retailers, but it warned Apple’s impending privacy changes could hurt revenue by interfering with ad targeting.

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The world’s biggest social media company said in its outlook that it expected to face “significant ad targeting headwinds in 2021.” Facebook forecast that Apple’s update of its iPhone operating system to iOS 14 could start biting into revenues as early as the end of the first quarter.

Shares were flat after hours following an initial drop.

The fourth-quarter results validated the company’s focus on making it easier for retailers to sell to Facebook users, who frequently were stuck at home last year during the COVID-19 pandemic.

For example, Facebook launched tools like Facebook Pay and Facebook Shops that enable consumers to make purchases from stores without leaving the company’s apps.

The coronavirus surge in e-commerce buoyed revenue growth for Facebook, which has been cooling steadily as its business matures.

Analysts said Facebook was less likely to feel the pinch from Apple’s privacy updates than other ad-supported companies with less access to first-party user data.

“In the end, I don’t think Facebook will be impacted as much as others as Facebook can provide workarounds for ad targeting,” said analyst Jonathan Kees of Summit Insights Group.

Monthly active users rose 12% to 2.80 billion, above the 2.75 billion expected by analysts.

Total revenue, which consists primarily of advertising revenue, rose to $28.07 billion in the fourth quarter ended Dec. 31 from $21.08 billion, a year earlier.

Analysts on average estimated quarterly revenue of $26.44 billion, according to IBES data from Refinitiv.

Net income came in at $11.22 billion, or $3.88 per share, compared with $7.35 billion, or $2.56 per share, a year earlier.

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