Facebook flags progress on 'metaverse' as sales slowdown eyed in second half

Facebook Inc warned that a significant slowdown in sales is likely in the second half of the year as it does not see the same pandemic trends continuing to help its business.

The social media behemoth reported US$29.1bn of revenue for the second quarter of 2021, up 56% on the same period a year ago thanks to higher advertising revenues as daily active users rose 7% to 1.9bn.

Net income doubled year-on-year to US$10.4bn, despite a US$2.1bn provision for taxes, and the company net cash levels swelled to US$64.1bn from US$62.0bn at the start of the year.

But management expects revenue growth rates in the third and fourth quarters to “decelerate significantly on a sequential basis as we lap periods of increasingly strong growth”.

Compared to pre-pandemic revenues from 2019, Facebook expects a “moderate” slowdown in the second half of the year compared to the past quarter.

Updates to Apple’s iOS platform are expected to exert a greater headwind on targeted adverts in the third quarter compared to the second.

Boss Mark Zuckerberg, unlike other billionaires bewitched by space travel and the universe, instead said he was excited about progress “to start to bring the vision of the metaverse to life”, a science fiction concept of virtual space where users interact in the form of avatars.

Pre-market trading was indicating Facebook shares will open 3.5% lower at just over US$360.

Analyst Sophie Lund-Yates at Hargreaves Lansdown said Zuck’s metaverse plans “is little more than an ambition for Facebook at the moment, but the insularity bred by lockdowns could act as a catalyst for users.

“If the idea comes to fruition, it could be a valuable income source – having users become even more immersed in its stable of social networks would ultimately mean advertisers are willing to part with more money for the data those users leave behind.”

She said with Facebook and its WhatsApp and Instagram platforms already an integral part of our lives, this makes Facebook’s “some of the most reliable ad revenues in the world” and while growth is expected to temper as the previous year’s heights were lapped, “the draw of Facebook’s global audience shouldn’t be forgotten as the numbers iron themselves out”.

Story by ProactiveInvestors