After another big quarter for Facebook, is there a limit to its growth? | WARC | The Feed

After another big quarter for Facebook, is there a limit to its growth?

Facebook’s Q2 2021 earnings sees the social giant continuing to grow on top of bumper numbers, but as it laps last year’s periods of extremely strong growth, continuing to post these numbers will be extremely tough.

What happened?

Facebook’s Q2 results were the usual bonanza of big increases:

• Quarterly revenue up 56% year-on-year to $29.1 billion.
• Net income grew 101% YOY to 10.3 billion.
• Monthly active users up 7% YOY to 2.9 billion.
• Daily active users of Facebook Group products (including Instagram and Whatsapp) was 2.76 billion on average, having grown 12% YOY.
• Price per ad grew 47% YOY.

Areas of interest

While some might be rightly sceptical of Facebook’s claims to strong video viewership, Mark Zuckerberg noted that “video now accounts for almost half of all-time spent on Facebook”.

Over on Instagram, however, Reels, an Instagram feature similar to the flowing short video content typically associated with TikTok, is now “largest contributor to engagement growth on Instagram”.

Barriers to growth

For the moment, the trouble that many had expected as a result of Apple’s IDFA changes that saw just 11% of iOS users allowing ad tracking, doesn’t appear to have dented the company’s prospects. However, the company does expect “greater impact” to ad revenue in the near future.

Other barriers are more numerical. The company expects total revenue growth YOY to “decelerate significantly on a sequential basis as we lap periods of increasingly strong growth”. As a result, Facebook has indicated that a two-year view might be a more accurate reflection as it excludes the impact from the COVID recovery, of which the firm was a major beneficiary.

Focus on the metaverse

A sign that Zuckerberg is now doubling down on the company’s new interest in the metaverse: it was mentioned on the earnings call roughly twice as much as Instagram.

The important part is not about the virtual world, however, it’s about the ads. In essence, they have a future in the metaverse: “as we embark on this next chapter, ads are going to continue being an important part of the strategy across the social media parts of what we do and it will probably be a meaningful part of the metaverse too.”

But there is also a significant opportunity to expand its commerce interests into the metaverse too.

“I think digital goods and creators are just going to be huge, in terms of people expressing themselves through their avatars, through digital clothing, through digital goods, the apps that they have, that they bring with them from place to place. A lot of the metaverse experience is going to be around being able to teleport from one experience to another,” Mark Zuckerberg said.

Sourced from Facebook, Seeking Alpha