Q2: Facebook Acknowledges IDFA Loss Could Have A Material Business Impact

Facebook is a money-making machine.

Despite a healthy second quarter that shrugged off the economic downturn, Facebook CFO Dave Wehner warned investors on Thursday that Apple’s IDFA changes coming in iOS 14 could “prove to be a challenging headwind.”

“We’re still trying to understand what these changes will look like and how they impact us and the rest of the industry,” Wehner said during the company’s second quarter earnings call. “At the very least, this will make it harder for app developers to grow using ads on Facebook and elsewhere.”

Facebook obviously has tons of first-party data for targeting and measurement across its own properties, but Facebook uses the IDFA to support its Audience Network.

Without IDFA, and mobile ad IDs in general (everyone’s waiting for Google to drop the other shoe), it becomes difficult for Facebook to match its own data with users when they show up in third-party apps.

Wehner has been warning for some time that ad targeting-related headwinds may cut into Facebook’s ad business. These headwinds include privacy regulations, Facebook’s own privacy-related tools – and privacy-focused changes made by mobile operating systems and browsers.

When Wehner first started ringing that alarm bell more than a year ago, IDFA restrictions were just a rumor. But here they are – and Facebook’s advertisers are asking about it. They want to know how they can maintain their performance. The answer? “We’re working on it,” Wehner said.

Facebook specifically called out the IDFA changes as a factor impacting the company’s Q3 outlook. Since iOS 14 won’t be released until the end of Q3, however, the most pronounced effects will not be felt until the fourth quarter.

Still, Facebook is forecasting roughly 10% growth in Q3.

In the first three weeks of July, which would or should include the effects of the Stop Hate For Profit advertising boycott, Facebook’s year-over-year ad revenue growth rate was roughly the same as for its Q2 results – around 10%.

And about that pandemic … Facebook grew overall revenue, ad revenue and average revenue per user (ARPU) in Q2.

Facebook’s total revenue for Q2 was $18.7 billion dollars, $18.3 billion of which came from advertising. ARPU for the quarter was $36.49, up from $34.18 at this time last year.

In terms of user metrics:

  • Facebook daily active users were 1.79 billion, a 12% YoY increase;
  • Facebook monthly active users were 2.7 billion in June, another 12% YoY increase;
  • DAUs for Facebook’s family of apps, which also includes Instagram, WhatsApp and Messenger, clocked in at 2.47 billion, a 15% YoY increase; and
  • MAUs for the fam were 3.14 billion, a 14% YoY increase.

Facebook said that its Q2 DAU and MAU totals reflect increased engagement due to shelter-in-place orders. As these restrictions continue to ease around the world, Facebook expects its daily and monthly active user counts to be flat or slightly down in most regions in Q3.

… but wasn’t there a historic antitrust hearing or something yesterday?

Although Facebook reported its Q2 earnings the day after CEO Mark Zuckerberg donned a suit to testify along with his big tech CEO bros in front of a congressional antitrust subcommittee – incredibly, not a single investor asked Zuckerberg about his appearance.

And the advertiser boycott barely got a mention, although Wehner pointed out that the Top 100 advertisers make up just 16% of Facebook’s ad revenue and falling.

According to Zuck: “Small businesses are the biggest part of our business, not the largest businesses. … We want to serve everyone, but if you as investors or analysts or anyone is thinking about our business, the really accurate way to think about what we do is we are in the business of serving small businesses.”

In that vein, Facebook announced a milestone on the call: It now has more than 9 million active advertisers across its services.

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