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Key takeaways from Facebook’s earnings call: Ad revenues grow despite boycott, WhatsApp integration into messaging ecosystem imminent

Facebook managed to post record revenues in spite of the significant criticism it has faced all over the world, including in the form of ad boycotts in its home country. Revenue was up 22% through the quarter ended September 30, 2020 at $21.47 billion, while net income increased 29% to $7.85 billion year-over-year. The company also announced that it is considering integrating WhatsApp into the messaging ecosystem of Messenger and Instagram, although this isn’t the first time he’s made this claim.

However, the company is facing a “significant amount of uncertainty” in 2021, said CFO Face Wehmer. This is largely due to the growing calls for regulations of internet platforms. Another concern for the company is the looming threat of severed transatlantic data-transfers due to the European Union’s moves to ensure data privacy of its citizens.

While daily and monthly active users grew globally, the figures fell in the US and Canada. This was expected, the company said, attributing it to an initial abnormal surge due to the COVID-19 pandemic. The company expects users to drop even further next quarter.

Ad revenue grows in spite of boycott, backlash

Facebook’s ad revenue figures for the quarter come amid a challenging time for the company. The quarter had begun with calls for a boycott of the company due to an alleged failure to control hate speech during the Black Lives Matter. Even Disney, one of the largest advertisers on the platform, had cut its ad spending on Facebook. Facebook had reacted by deciding to label content by politicians, which has also attracted the ire of conservative politicians in the country. In spite of these conditions, Facebook managed to post an ad revenue of $21.2 billion.

On personalised ads, data-privacy regulations in the EU, Section 230

Zuckerberg was quite concerned about challenges to its personalised and targeted ads business, especially due to increasing regulatory discussions in the EU. He even criticised Apple, which recently limited advertisers’ ability to target iPhone owners.

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“I continue to believe that we need new regulation that allows for personalized and relevant ads while protecting people’s data and privacy. And I worry that some proposals, especially in the EU and actions planned by platform companies like Apple, could have a meaningful negative effect on small businesses and economic recovery in 2021 and beyond.” — Mark Zuckerberg, CEO, Facebook

Tooting his old horn, Zuckerberg said personalised ads allowed small businesses to spend their advertising budgets in an economical way, and threatening the ecosystem would hurt them deeply. He said this is a policy question that Facebook will need to engage on for the “future of the internet: “There are very different visions of that future held in different parts of the world.”

The Facebook CEO was also asked about his statements in the US Senate hearings the previous day, wherein he supported the reform of Section 230. He was asked what these  changes would look like and what they would cost Facebook. Zuckerberg said that a regulatory regime such as the one in France which focuses on transparency in content moderation could be one option. He couldn’t comment on the cost of these future changes, as it will depend on “specific language or details of how this lands”.

WhatsApp integration with messaging ecosystem imminent

Private messaging continues to be a major priority for the company. Only recently, it integrated the messaging feature its Messenger and Instagram with “cross-messaging”.  Zuckerberg said the goal is to make is possible for users to choose between any of its apps for their messaging needs. Facebook should, he said, simplify things in a way that Messenger, Instagram and WhatsApp “can start to function a little bit more like one connected interoperable system”. However, it should be noted that even though Facebook has integrated Messenger and Instagram’s communication feature, WhatsApp integration won’t be as straightforward — the messaging platform, unlike Messenger and Instagram, is end-to-end encrypted.

“There is more work to happen here. We, of course, want to bring in WhatsApp to that interoperability as well. There are more features we want to add even to the Messenger-Instagram interoperability” — Mark Zuckerberg, Facebook CEO

Reels engagement encouraging

Instragram Reels, a short-video feature, is seeing “encouraging” results, the company said. The Reels feature has been expanded to more than 50 countries. It refused to give specific numbers on engagements, saying it is too early. Reels is pitted directly against TikTok, a company that is facing immense pressure and uncertainty in the US due to its Chinese ownership. In India, Reels saw an opportunistic launch of sorts — it was rolled out only days after TikTok was banned in the country.

AR and VR a huge interest for company

Zuckerberg said Facebook is the most advanced in virtual reality. “The big milestone that I’m focused on here is we want to get to 10 million active units in our VR systems because we think at that point, that’s when it will become — the ecosystem will really be able to be self-sustaining and accelerate,” he said. He admitted that currently a lot of the content development is being funded by Facebook.

He said that he was really proud of the Quest 2 headset, whose preorders have apparently outpaced the original Quest preorders by more than five times. At the same time, Facebook is also working on building AR glasses, which will be the “Holy Grail” of immersion. “One day, you’re going to be able to sit down for dinner and your parents, even if they’re on the other side of the country or look up directions, without having to take out your phone and take yourself out of the moment.”

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Earnings call transcript | Press release

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