Facebook shows growth as privacy feud with Apple escalates

The social network expects a new privacy update from Apple to impact its ad targeting, starting in the second quarter.

Queenie Wong Former Senior Writer
Queenie Wong was a senior writer for CNET News, focusing on social media companies including Facebook's parent company Meta, Twitter and TikTok. Before joining CNET, she worked for The Mercury News in San Jose and the Statesman Journal in Salem, Oregon. A native of Southern California, she took her first journalism class in middle school.
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Queenie Wong
3 min read
Facebook social media app

Facebook released its first-quarter earnings on Wednesday.

James Martin/CNET

Facebook grew its users and revenue in the first quarter, but the social media giant reiterated that a new privacy update Apple released this week could hinder its ads business. 

"We continue to expect increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recently-launched iOS 14.5 update, which we expect to begin having an impact in the second quarter," Facebook CFO Dave Wehner said in a statement.

The social network grew its revenue by 48%, to $26.17 billion, beating Wall Street's expectations of $23.7 billion. Facebook earned $3.30 a share, surpassing the forecast of $2.34 per share anticipated by analysts surveyed by Thomson Reuters. With more businesses going online during the coronavirus pandemic, Wehner noted that the company's revenue growth was fueled by an increase in the average price per ad. Facebook's stock jumped by nearly 5%, to $322.04 per share, in after-hours trading. 

Roughly 2.85 billion people logged in to Facebook every month, up 10% compared with the same period last year, the company said Wednesday. 

Facebook's first-quarter earnings come as a public battle with Apple continues to escalate. The social network said Monday that it started rolling out a change required by Apple as part of Apple's iOS 14.5 software update. App developers, including Facebook, will start showing iPhone and iPad users a prompt that asks for permission to track them across other apps and websites. Before showing Apple's required notification, Facebook plans to display its own screen that outlines how the company uses the data, including by noting that advertising allows the company to avoid charging a subscription fee to use its various services.

Facebook COO Sheryl Sandberg said during a conference call that the company is helping businesses navigate through the iOS 14.5 changes and is rebuilding "meaningful" parts of its ad technology. She added that the social network believes businesses can still get "great results" from digital ads. 

The world's biggest social network has had a poor track record when it comes to protecting user privacy. Its most damaging scandal involved data harvesting by political consulting firm Cambridge Analytica that could have impacted the outcome of the 2016 US presidential election. Facebook, though, has publicly pushed back against Apple's privacy change, stating that it could make it tougher for small businesses to target ads to attract new customers. Apple, on the other hand, says the new feature, known as App Tracking Transparency, will give users more control over their data. 

While Facebook believes the change could harm its ad business, CEO Mark Zuckerberg has downplayed the looming impact on his company. In March, he said in an interview on social audio app Clubhouse that he was "confident" that Facebook would be able "to manage through that situation well."

New products in the works

At the same time it's battling Apple, Facebook continues to work on new products as competition heats up from short-form video app TikTok, social media site Twitter and other tech companies.

Facebook plans to roll out several audio tools in the coming weeks, including a Clubhouse competitor and a feature called Soundbites that'll let users share short audio clips. This week, Spotify added a mini player for songs and podcasts in the Facebook app, which lets users discover new content more easily through social media. 

Facebook has also been doubling down on video within the last year, releasing tools such as videoconferencing feature Messenger Rooms. The company also introduced a short-form video feature called Reels on Facebook and on its photo-service Instagram, going head-to-head with TikTok.

From e-commerce to virtual and augmented reality, the social network is also looking at other ways to make money outside of just ads. Oculus, the virtual reality headset maker Facebook owns, released the Quest 2 last year. Zuckerberg said Wednesday that the headset is doing better than expected in sales, but he didn't release numbers. "I expect virtual and augmented reality to be some of the most social platforms that get built," he said.