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Will International User Growth Aid Facebook's (FB) Q3 Earnings?

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Facebook's FB growing popularity in international markets, particularly Asia, is expected to have expanded its user base in third-quarter 2021, the earnings results of which are set to be reported on Oct 25.

The Zacks Consensus Estimate for Monthly Active Users (“MAU”) in Asia stands at 1.276 billion, indicating 9.4% growth from the year-ago quarter’s reported figure.

The consensus mark for MAU in Europe is pegged at 422 million, suggesting 2.2% growth from the year-ago quarter’s reported figure.

The consensus mark for Rest of World’s MAU is pegged at 964 million, indicating 6.4% growth from the year-ago quarter’s reported figure.

Facebook, Inc. Revenue (Quarterly YoY Growth)

Facebook, Inc. Revenue (Quarterly YoY Growth)

Facebook, Inc. revenue-quarterly-yoy-growth | Facebook, Inc. Quote


Further, strength in user base is expected to reflect on advertising revenue growth amid an improving ad-spending environment.

Click here to know how the company’s overall third-quarter performance is likely to be.

Instagram & E-commerce Initiatives to Aid Revenue Growth

Facebook’s monthly active user base of more than 3.51 billion (including its Family of services — Instagram, WhatsApp and Messenger) presents a large canvas for advertisers and makes the platform highly attractive.

A recovery in ad demand on an improving spending scenario bodes well for Facebook. Momentum experienced by Facebook for Business is expected to have driven the top line. Facebook Business Suite enables businesses to post on Facebook and Instagram at the same time as well as manage and receive messages, notifications and alerts in one place.

Facebook is expected to have benefited from its e-commerce endeavors in the to-be-reported quarter.  Initiatives to build tools and functionalities for small- and medium-sized businesses (SMBs) are helping them provide e-commerce services to users.

Markedly, SMBs have become a revenue-generating source for the social-media giant, driven by the coronavirus-induced shift in consumer demand for e-commerce services.

In June, this Zacks Rank #3 (Hold) company announced the availability of Shops to WhatsApp and Marketplace. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shopping has been powered by new technologies like Instagram visual search and AR Dynamic Ads.

Facebook has expanded its e-commerce tool, Facebook Shops, to its WhatsApp messaging app in several countries. Shops’ product listings have been expanded to Facebook Marketplace in the United States, providing more ways for brands to connect with interested shoppers and more ways for Facebook to encourage browsing and buying activity.

Facebook is also investing in immersive technologies like augmented reality and artificial intelligence to enhance users’ shopping experience.

In September, Facebook announced the launch of its much-awaited smart glasses, which have been developed in collaboration with EssilorLuxottica. The smart glasses, called Ray-Ban Stories, is priced at $299 and will be available in 20 style combinations online as well as in retail stores in the United States, Australia, Canada, Ireland, Italy and the U.K..

Moreover, improved privacy features of Instagram are expected to have expanded its user base.

In August, Facebook announced new features to help protect people from abuse on Instagram. These include the ability for people to limit comments and DM requests during spikes of increased attention, stronger warnings when people try to post potentially offensive comments and the global rollout of its Hidden Words feature, which allows people to filter abusive DM requests.

Facebook also announced new features for young people on Instagram. This includes defaulting young people into private accounts, making it harder for potentially suspicious accounts to find young people and limiting the options advertisers have to reach young people with ads.

Facebook also launched Sensitive Content Control on Instagram, which allows a user to decide how much sensitive content to show up in Explore.

However, ad-targeting-related headwinds are expected to have hurt ad-revenue growth rate. Changes made by Apple AAPL and Alphabet’s GOOGL Google in their mobile operating systems and browser platforms limited Facebook’s ability to track user-activity trend.

Facebook expects changes made by Apple in its iOS platform to limit its ability to track user-activity trend. Additionally, intensifying competition for ad-dollars from the likes of Google, Snap SNAP and Twitter remains a headwind.

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