The management team of Facebook (FB -0.02% ) – soon known as the Meta – was right to predict a major headwind of changes Apple (AAPL 2.80% ) recently made to its mobile operating system. The social media giant’s advertising revenue fell in the third quarter of the fiscal year, as millions of users opted out of tracking services, making the platform less effective for marketers.
But Facebook is doing a good job bypassing these issues and finding other areas that are raised by the changes. Let’s take a look at some of the top reasons why Apple’s new focus on privacy won’t derail Facebook’s growth targets in 2021 or beyond.
Declining ad effectiveness doesn’t hurt as much when growth is strong, and Facebook excels here. Daily active users jumped to 1.93 billion in the third quarter, from 1.82 billion a year earlier. The company now has 2.8 billion people using at least one of its services (Facebook, Instagram, Messenger and WhatsApp) per day, up from 2.5 billion last year.
This incredible commitment helped protect ad revenue even as Facebook suffered lower ad effectiveness and greater difficulty with ad tracking, thanks to Apple’s platform changes. Average revenue per user remained stable around the world at around $ 10 and declined only slightly in the US market, down to $ 52.34 from $ 53.01 in the previous quarter.
Making the most of a bad situation
Apple iOS changes are also helping Facebook push its own e-commerce solutions further. The Marketplace service is a small step in that direction, but CEO Mark Zuckerberg and his team believe they will have a much bigger platform over time – with a big step forward coming this holiday season.
“Building a full-fledged trading platform is a multi-year journey,” Zuckerberg said on a conference call with Wall Street analysts. The Shops platform, which allows direct payment on Facebook or Instagram, is getting new features and extended promotions in Q4, which should help advertisers offset some of Apple’s tracking changes.
Without a doubt, Facebook shareholders would prefer the company not to endure the challenges of Apple’s new posture on privacy. Its initiatives will not solve them entirely, businesses may continue to look to other platforms, and advertising growth may be slower in the coming quarters.
But so far, the company isn’t seeing much profit. Facebook’s efforts kept the financial impact at a modest level during the past quarter. And the business is tackling the weakness. “As we and our advertisers continue to feel the effects of these [iOS] changes, “said COO Sheryl Sandberg,” we will continue to work hard to mitigate them.
Meanwhile, as people spend more time on Instagram and the News Feed, it’s getting easier for Facebook to argue that most advertisers need to be on its apps. And so, despite recent negative headlines in the news, Facebook still has a long avenue for expansion ahead in 2022 and beyond. This means the digital advertising industry is more attractive than ever to the social media leader, even after Apple has shaken it up.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.