Facebook’s ad business posts another strong quarter

Facebook has posted sharp growth in revenue and profit, fuelled by robust digital ad spending, as it continues to face scrutiny.

Facebook’s profit doubled but its shares slipped when it said it expected revenue growth to slow. Picture: AFP

Facebook posted sharp growth in quarterly revenue and profit, fuelled by robust digital ad spending, as it continues to face scrutiny over the size and influence of its platforms.

The social-media company’s second-quarter earnings report showed that advertisers’ greater focus over the past year on reaching consumers online continues to be a tailwind. Analysts also expected the parent of Facebook, Instagram and WhatsApp to continue benefiting from a rise in consumers making purchases from brands directly through its apps.

Facebook’s profit doubled from a year earlier to $US10.39 billion, or $US3.61 a share, soundly beating analysts’ expectations. Revenue rose 56 per cent to $US29.08 billion.

However shares fell 3 per cent in after-hours trading as the company said it expects revenue growth to slow in the second half of this year.

The results come as Google parent Alphabet reported its best quarter ever for sales and profit, bolstered by a strong digital advertising market. Last week, Snap said its revenue more than doubled in the second quarter and user growth jumped the most in four years, while Twitter said sales rose 74 per cent and that it swung to a profit from a year earlier.

Facebook’s stock has gained about 22 per cent over the past three months, compared with roughly 5 per cent for the S&P 500 index.

The June-ended quarter wasn’t without controversy for Facebook. The tech giant drew sharp criticism from President Biden, who said it wasn’t doing enough to stop the spread of vaccine misinformation on its platforms. Facebook countered that it was doing its part to help get more Americans vaccinated, such as by operating pop-up vaccine clinics in several low-income and underserved communities.

Former President Donald Trump also took a swing at Facebook, suing the company as well as Google’s YouTube and Twitter earlier this month for removing him from their platforms in response to posts he made around the time of the January 6 riots at the US Capitol.

Mr Trump has claimed he has been wrongly censored by them in violation of his First Amendment rights. Facebook didn’t comment on the suit, which was filed in US District Court in Miami.

Separately, Facebook remains in legal battles with US regulators over its size. The Federal Trade Commission and 46 states in December filed antitrust lawsuits against Facebook, accusing it of buying and freezing out small start-ups to stifle competition. Though a federal judge dismissed both lawsuits last month, the group of attorneys general filed a notice of plans to appeal the decision Wednesday.

Facebook has said the FTC’s case aims to rewrite history and ignores the tech industry’s competitive dynamics and that the states’ case doesn’t prove that “citizens paid higher prices, that output was reduced or that any objective measure of quality declined as a result of” the company’s actions.

Earlier this month Facebook pledged to pay more than $US1 billion to content creators on its social networks through 2022, joining its social-media peers who have made big-dollar commitments over the past year to invest directly in people responsible for boosting engagement among users. The move reflects a bet that monetary rewards will serve as a sweetener for those deciding which platforms to focus their energy on.

Great content “creates a lot of stickiness,” said Benchmark analyst Mike Hickey. “Any way you can motivate your community to contribute more is probably the best way to drive lasting engagement, which drives monetisation.”

Wall Street Journal