Warning Of Significant Slowdown In Growth Issued By Facebook

Revenue growth is expected to “significantly” slowdown in the second half of the current year, warned the largest social media company of the world Facebook. This was stated by the company as it reported a significant growth in its revenue for the three months to 30 June to $29bn compared to $18.69bn in the same period a year ago.

However the company said its sales revenues would slow “as we lap periods of increasingly strong growth”.

Over the lockdown period because of the Covid-19 pandemic, Facebook has benefitted from companies targeting consumers with online ads.

The revenue warning however brought down its shares by as much as 5 per cent in after-hours trading.

“We had a strong quarter as we continue to help businesses grow and people stay connected,” said Facebook founder and chief executive Mark Zuckerberg.

The average monthly users of the social media platform also increased to 2.9 billion globally.

The company’s profits doubled to $10.4bn in the second quarter. However it also cautioned that it expects “year-over-year total revenue growth rates to decelerate significantly on a sequential basis.”

A number of other headwinds it would be facing in the coming months were also pointed out by the California-based company which included the new privacy controls that have been introduced by Apple in April this year. The new privacy controi9ls on iPhones are designed to limit ability of advertisers to tracks iPhone users without confirmation for them. This is likely to have an impact on its revenues, Facebook said, specifically between July and October and it has factored into its projections for how it will perform.

Companies such as Facebook would find it harder to target adverts if consumers opt out of being tracked. Such ads make up a large part of the social media company’s revenues.

“It is apparent that the Facebook user base is skewed to iOS users and will continue to be negatively impacted from the iOS change. Other technology firms have seemed to navigate this challenge but all will see a negative impact longer-term,” said Paolo Pescatore, an analyst at PP Foresight,

A number of investigations over its handling of users’ personal information were also faced by Facebook.

For example, an investigation into a data leak in which the details of hundreds of millions of Facebook users were published online was launched in April this year by the Irish Data Protection Commission.

It was “co-operating fully” with the relevant authorities, said Facebook.

Plans for transformation of Facebook into a “metaverse company” from a social media network with in the next five years was outlined by Mark Zuckerberg recently even though there are growing concerns about privacy.

A metaverse is an online world where people can game, work and communicate in a virtual environment, often using virtual reality (VR) headsets.

Zuckerberg described it as “an embodied internet where instead of just viewing content – you are in it”. People shouldn’t live through “small, glowing rectangles”, he told tech publication The Verge.

“That’s not really how people are made to interact,” he said, speaking of reliance on mobile phones.

(Adapted from BBC.com)


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