Facebook’s better-than-expected quarter is just the calm before the storm

Facebook released its quarterly earnings today, and while the results fall in line with what analysts estimated, they don’t exactly paint a pretty picture for what’s ahead. The company has taken the year to leverage the effects of the ongoing pandemic, forcing many to work from home and to shop online. With the lack of physical communication, dependence on social media has increased, particularly during the recent election season.

On a positive note, daily active users were in-line with what analysts expected, coming in at 1.84 billion, while monthly active users saw a 12% year-over-year increase to 2.8 billion. Total revenue saw a 33% YoY increase to $28.07 billion, which was above analysts’ expectations of $26.44 billion. Earnings and average revenue per user were also both up at $3.88 and $10.14 respectively.

Facebook’s problems are just beginning as user privacy comes into focus.

Facebook was able to maintain a steady amount of active users, despite losing roughly 1 million in the U.S. and Canada, and the company no doubt faced plenty of challenges in the final months of 2020.

Facebook has been caught up in new antitrust lawsuits and backlash over its privacy practices, particularly as they pertain to its ownership of Instagram and WhatsApp. The lawsuit claimed that Facebook was practicing anti-competitive behavior by purchasing both apps, thus getting rid of potential competition and allowing it to remain in control over its position.

In a surprising move following those allegations, Facebook moved to change WhatsApp’s policy to require sharing data with Facebook. Users of the popular messaging app flocked from WhatsApp to Signal and Telegram, some of the best messaging apps, over the fear that Facebook was getting greedy with its data.

And while Facebook’s may have had a good quarter by-the-numbers, the company warned that things might not be so rosy going forward:

We also expect to face more significant ad targeting headwinds in 2021. This includes the impact of platform changes, notably iOS 14, as well as the evolving regulatory landscape. While the timing of the iOS 14 changes remains uncertain, we would expect to see an impact beginning late in the first quarter. There is also continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments, and like other companies in our industry, we are closely monitoring the potential impact on our European operations as these developments progress.

Facebook is alluding to it’s public attacks over Apple’s new privacy measures in iOS, which makes it harder for companies to track users and, according to Facebook, could hurt small businesses. Apple, meanwhile, has stated that it’s simply looking out for its users, who should be aware of when their data is being collected.

Facebook was also the subject of increased regulatory control in the UK, which will now be handled by the new Digital Markets Unit. The new regulations seek to give users more control over how much of their data is shared, which could potentially impact Facebook’s business.

Of course, the political landscape continues to play its part given the recently culminated U.S. election. Facebook and other social media sites were put under intense focus when riots were incited at the U.S. Capitol, forcing the sites to ban the former president Donald Trump, as well as users and groups who aided in spreading misinformation about the election, which was seen as harmful and potentially destructive. The move to implement these bans and increase content moderation was seen as divisive, with some considering it an attack on free-speech while others welcoming the move but finding it too-little-too-late.

Facebook may have a difficult quarter ahead, but Mark Zuckerberg is focused on the positive. “I’m excited about our product roadmap for 2021 as we build new and meaningful ways to create economic opportunity, build community, and help people just have fun.”