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Facebook’s third-quarter earnings revealed that its ad business is alive and well despite a temporary ad boycott by companies hoping to pressure the service to act against hateful posts.
Facebook’s revenue grew 22% year-over-year to $21.5 billion, beating analysts’ expectation of $19.82 billion. The company credited its sales gain to an accelerated online ad shift by customers.
“I don’t think we know exactly which way this will turn … whether this is a one-time shift toward a dramatic increase in commerce happening online versus a continued trend we will see,” said Facebook CEO Mark Zuckerberg. “But certainly, we haven’t seen any decline or return to baseline.”
Facebook also revealed that it lost users in its core money-making markets: the U.S. and Canada. However, worldwide monthly and daily active users rose in the third quarter.
Facebook’s shares briefly dropped more than 1% in after-hours trading at $277 per share.
The earnings come as the company faces increasing scrutiny for the hate speech, misinformation, and violence on Facebook. Just a day earlier, Zuckerberg had testified before a Senate committee about whether a law protecting Internet services from liability for what their users post should be curtailed. Meanwhile, Facebook is also struggling to police voter suppression and political extremism during a heated presidential election.
Here are three things to know about Facebook’s third-quarter earnings.
Ad boycott didn’t hurt Facebook
In July, hundreds of advertisers, including some big brands, joined the Stop Hate for Profit campaign, which called for a temporary ad boycott of Facebook and Instagram. The goal was to pressure the company into doing more to prevent hate speech and discrimination.
But the quarterly results made it clear: Despite the long list of marketers that pulled their ads for the month, the boycott didn’t do much to dent Facebook’s revenue. Sales still jumped 22% year-over-year, just seven percentage points less than the company’s third-quarter year-over-year growth in 2019. Facebook also said it expects its fourth-quarter revenue to grow more quickly than in the third quarter, as holiday advertising picks up.
Beware of regulators
Facebook expects to face a “significant amount of uncertainty” in 2021, including regulation of its business.
It said that regulatory changes have made it uncertain whether it will continue to have access to European users’ data. In July, Europe’s highest court, concerned about U.S. surveillance, ruled against a deal that previously gave U.S. companies privileged access to transatlantic data, making data transfers vulnerable to regulatory scrutiny.
And though Facebook didn’t address the U.S. regulations on Thursday, lawmakers and regulators continue to investigate the company. They’re drilling in on whether Facebook has broken any antitrust laws or whether it should be subjected to additional regulation over what its users post.
Valuable users vanish
Facebook said monthly active users during the quarter grew 12% year-over-year to 2.74 billion on its core Facebook app. But in the U.S. and Canada, the highest revenue sources on a per user basis, it lost 1 million of the 256 million monthly active users it had in the prior quarter.
In the third quarter, the average revenue for each U.S. and Canadian user was $39.63. European users came in second at $12.41, or $26.90 less per user.
Facebook credited the quarter-to-quarter user decline in the U.S. and Canada to soaring growth during the pandemic, which kept many people at home. In the fourth quarter, the company expects the number of daily and monthly active users to be flat or slightly down from the third quarter.
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