Chart of the Week: Facebook’s Ads Business Roars Back

April 30, 2021

This past week has been a big one for earnings and, in particular, numbers from “Big Tech” giants. One of those reporting first-quarter results was Facebook Inc (NASDAQ: FB).

Unsurprisingly, spending on online ads has rebounded with a vengeance. Yet the scale of the earnings beat was particularly pronounced for Facebook as its net income nearly doubled, year-on-year, to US$9.5 billion.

All investors are aware that Facebook is a money-generating machine and it was in full force in the first quarter of the year.

While its online ad business undoubtedly suffered amid the depths of the pandemic lockdown last year, Facebook still managed to post user growth through each quarter of 2020.

That has culminated in its latest figures, with Facebook recording 2.85 billion monthly active users (MAUs) at the end of the first quarter while MAUs who interact with at least one of Facebook’s apps number 3.45 billion.

With businesses returning and starting to spend again, tech giants like Facebook and fellow ad giant Alphabet Inc (NASDAQ: GOOGL), also known as Google, have leveraged those massive networks.

Ad revenue for Facebook, which is basically where it generates all its sales, rose 47% year-on-year to US$25.4 billion in the first quarter – with strong growth across all regions (see below).

Watching the Apple spat

Long-term investors, however, should be watching how the very public feud with iPhone giant Apple Inc (NASDAQ: AAPL) plays out.

Apple’s mobile operating system, iOS, will now see users of its devices be able to opt in to ad tracking. How that will impact Facebook’s ad business is unclear but should become more obvious over the coming quarters.

Beyond that, Facebook is also dealing with anti-trust investigations in the US over prior acquisitions. Yet in the meantime, Facebook shareholders will be sitting pretty after the social media giant’s latest blowout earnings.

Advertising revenue by Facebook user geography (US$ millions)

Source: Facebook Q1 2021 earnings presentation

Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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