Facebook blames Apple for revenue miss, ahead of expected name change this week

Facebook’s revenue miss blamed on Apple’s tough privacy rules ahead of the social media giant’s expected name change, amid mounting pressure on multiple fronts.

Facebook, led by Mark Zuckerberg, blames Apple for revenue miss ahead of expected name change. Picture: AFP

Facebook has warned Apple’s strict privacy rules are creating “significant uncertainty” for its advertising model after the tech giant missed market expectations with its latest quarterly revenue figures.

The group is expected to announce a major name change and rebrand in the next few days, amid numerous controversies, including in Australia where whistleblower Frances Haugen testified before MPs last week.

Facebook flagged on Tuesday a new $US10bn ($13.3bn) spend on its hardware division – Facebook Reality Labs – ahead of the rebrand, which is expected to reposition Facebook as a “metaverse” company rather than a social media company.

The tech heavyweight said that Apple’s privacy rules – which require apps to ask users if they want to be tracked or not – hit third-quarter revenue, which rose to US$29bn from $US21.5bn last year, missing analyst expectations of $US29.6bn.

Profit rose 17 per cent to $US9.19bn, while it posted 3.58bn monthly users, up 12 per cent from the same time a year earlier.

Facebook blamed “continued headwinds from Apple’s iOS 14 changes” for the company’s sales growth slowdown.

Facebook COO Sheryl Sandberg testifies before the Senate Intelligence Committee on Capitol Hill in Washington, DC. Picture: AFP

Social media outfit Snap’s shares tumbled by more than 20 per cent last week after it blamed Apple’s ad policies for a slowdown in revenue growth, but Facebook’s shares rose more than 3 per cent in after-hours trading in Monday.

Facebook‘s chief operating officer Sheryl Sandberg said on an earnings call that the iOS changes meant it was more difficult for Facebook to target its users, and therefore “we don’t see the same level of conversion data coming through.“

Chief executive Mark Zuckerberg told analysts that Facebook would add $US50bn to its stock buyback program, and would compete more directly with the likes of TikTok to attract young users, particularly those between 18 and 20 who are attractive for advertisers.

“Over the last decade as the audience that uses our apps has expanded so much and we focus on serving everyone, our services have got to be the best for the most people who use them rather than specifically for young adults,” Mr Zuckerberg said, adding the shift would take “year, not months to fully execute.”

Facebook is also widely expected to announce a major name change this week at its annual Connect conference, which is scheduled for October 28.

The rebrand would likely position the blue Facebook app as one of many products under a parent company overseeing groups like Instagram, WhatsApp, Oculus, and more, according to reports.

A rebrand could also serve to further separate the futuristic work Facebook is focused on, from the current intense scrutiny surrounding the company.

Facebook is facing new regulations globally, including in Australia, where new legislation was released on Monday which would force digital entities, including Facebook, to comply with new privacy requirements.

This includes stronger protections for children using social media, requiring social media platforms to take “all reasonable steps” to verify a user’s age, while giving primary consideration to the best interests of the child when handling children’s personal information.

In response, Facebook director of public policy for Australia and New Zealand Mia Garlick said the company had been “actively calling for privacy regulation”, as it understood the importance of Australia’s privacy law evolving “at a comparable pace” to the rate of technological change.

“We have supported the development of international codes around young people’s data, like the UK Age Appropriate Design Code,” she said. “We’re reviewing the draft Bill and discussion paper released today, and look forward to working with the Australian government on this further.”

Facebook has come under heavy criticism in recent weeks following revelations from US-based whistleblower Frances Haugen that the company repeatedly put profits before its users’ mental health and wellbeing.

Facebook whistleblower Frances Haugen leaves the Houses of Parliament in central London. Picture: AFP

Ms Haugen said at a hearing last week that the Morrison government should team up with the Biden administration to force the social media giant to ­relinquish some of its power and improve transparency. She said politicians shouldn’t trust the tech giant’s promises to make the platform safer and nations should rally ­together to push for change.

“Facebook’s pattern of ­behaviour – in terms of where they invest their integrity ­resources – shows that they know they are vulnerable to regulation in the US,” she said. “There are opportunities for co-operation with the US government and saying, ‘Why don’t we work together on transparency regulation?’”

The former Facebook product manager courted international attention this month when she testified at a US congressional hearing, declaring her former employer put profits ­before people and knowingly harms its users, including children. Facebook strongly denies the claims.

Ms Haugen said Australia could be a leader on the world stage when it came to social media regulation, but countries needed to band together to achieve results.