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Facebook has nearly doubled its Q1 earnings from last year, according to earnings reports released this week.
The report states that advertising revenue dramatically increased by 146% from 2020. This is interesting, considering the fact that the number of active Facebook users only increased by 8%.
CFO outlook commentary within the earnings report stated that the increase in revenue was largely due to rising ad prices.
“We are pleased with the strength of our advertising revenue growth in the first quarter of 2021, which was driven by a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered,” the report states.
It’s also important to note that digital advertising has increased across the board, not just with Facebook. With stay-at-home orders, working from home, and online learning becoming the new norm, people spent more time at home in front of screens than ever before. Along with an increase in demand for online advertising, competition for ad visibility and ad prices also grew this past year.
Other Changes Coming to Facebook
Apple recently released iOS 14 and IDFA, which means all Apple users will have to consent to cross-app tracking. Advertisers will also have to provide two short lines of text to explain this to users.
Facebook has spoken out against the change, arguing that it would hurt publisher revenues.
“We know this may severely impact publishers’ ability to monetize through Audience Network on iOS 14, and, despite our best efforts, may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS 14 in the future,” said Facebook.
Facebook later made the decision to adopt Apple’s SKAdNetwork API, but stated it would not implement Private Click Measurement (PCM), with the reasoning that it doesn’t capture the complexities of the user journey. Facebook instead decided to create Aggregated Event Measurement (AEM) to measure conversion events on iOS.
Revenue Forecasts For 2021
With the increase in ad prices driving revenue growth, Facebook expects that revenue will either continue to increase or remain stable throughout 2021.
“We expect second quarter 2021 year-over-year total revenue growth to remain stable or modestly accelerate relative to the growth rate in the first quarter of 2021 as we lap slower growth related to the pandemic during the second quarter of 2020,” said Facebook’s CFO Sheryl Sandberg.
“It’s also on us to keep making the case that personalized advertising is good for people and businesses and to better explain how it works so that people realize that personalized ads can be privacy-protected.”
