Apple's iOS privacy updates have impacted Facebook’s third quarter results with the social media giant expecting it to last at least into the next quarter.
Facebook reported advertising revenue of US$28.3 billion for the quarter, up 33% year-on-year. Total revenue was US$29 billion, up 35%, slightly missing expectations.
However, earnings per share were stronger at US$3.22 compared to US$3.19 per share expected by analysts.
Facebook said it expects fourth quarter total revenue to be in a range of US$31.5 billion to US$34 billion, citing the continued impact from Apple’s iOS privacy updates which require consent from users to track their iPhone activity for advertising.
“Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple's iOS 14 changes, and macroeconomic and COVID-related factors,” Facebook said in its earnings update.
“In addition, we expect non-ads revenue to be down year-over-year in the fourth quarter as we lap the strong launch of Quest 2 during last year's holiday shopping season.”
It’s not the only social media company to be impacted by the changes, with Snap CEO Evan Spiegel saying at its earnings update last week that its advertising was “disrupted” by changes to iOS tracking.
Facebook also announced it plans to break out Facebook Reality Labs (FRL) as a separate reporting segment from the fourth quarter. FRL includes VR hardware, such as Oculus Quest, software, and content which are part of the company's plans to build a “metaverse”.
“As we have discussed, we are dedicating significant resources toward our augmented and virtual reality products and services, which are an important part of our work to develop the next generation of online social experiences,” Facebook says.
“The new segment disclosures will provide additional information on the performance of FRL and the investments we are making. Under this reporting structure, we will provide revenue and operating profit for two segments: The first segment, Family of Apps, will include Facebook, Instagram, Messenger, WhatsApp and other services. The second segment, Facebook Reality Labs, will include augmented and virtual reality related hardware, software and content.
“We expect our investment in Facebook Reality Labs to reduce our overall operating profit in 2021 by approximately $10 billion. We are committed to bringing this long-term vision to life and we expect to increase our investments for the next several years.”
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