Facebook’s advertising business continues to be very lucrative

San Francisco, Düsseldorf Facebook disappointed when it presented its quarterly figures for the months July to September. With sales of around 29 billion US dollars, revenues were just below the previous quarter. Analysts had expected sales between 29.6 and 30.2 billion dollars.

As a result, sales are not going well in what is already a critical time for the company. After whistleblower revelations, the group and its corporate culture in the USA have been under severe criticism for weeks.

The former Facebook manager Frances Haugen had revealed, among other things, that Facebook knows about its negative effects on young users of the photo platform Instagram, but is hiding it. In addition, documents published by them show that the group deliberately tolerates celebrities violating its usage rules.

The conclusion of many critics: Facebook, which defines the rules of discussion on the Internet for almost half of the world’s population, is extremely problematic. And the group shows no willingness to change.

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This impression is likely to have deepened when the quarterly figures were presented. Because after Facebook boss Mark Zuckerberg last let others speak on the matter, he spoke to analysts on Monday evening – and describes himself as a victim of the media.

Well-intentioned criticism helps Facebook to get better, said Zuckerberg. “But what we are seeing here is a coordinated action in which leaked documents are used specifically to paint a wrong picture of our company.”

Zuckerberg blamed another “headwind” for the current economic situation and the uncertain development in the near future. What is meant is a software update from the smartphone manufacturer Apple, because of which Facebook can no longer collect a lot of usage data from iPhone owners and use it for individualized advertising.

Despite everything, Facebook was able to make more profit than expected: Thanks to an operating margin of 36 percent, the group closed the quarter with a profit of around 9.1 billion dollars. For the coming fourth quarter, CFO Dave Wehner forecast sales between 31.5 and 34 billion dollars – a deliberately wide range.

AI should help

It is still unclear exactly how the Apple update will affect the Christmas business, in which Facebook typically earns a lot of money with ads. In addition, many customers are suffering from a lack of material in the current economic situation, which is also likely to have a negative effect on the advertising volume.

In order to regain control of the situation, Facebook wants to use artificial intelligence (AI) to gain additional knowledge about its users in the case of the Apple update. In this way, the accuracy of target group-specific advertisements could be increased again. But this is a long-term project, said Facebook’s Chief Operating Officer Sheryl Sandberg.

For Zuckerberg, however, another project is of greatest importance, especially in the long term. The head of the company wants to build a “Metaverse” in the coming years and realign the company for this goal. To this end, Facebook is also developing its own hardware such as virtual reality glasses, which could make it less dependent on software updates from device manufacturers. The subsidiary Oculus is also becoming increasingly important.

Zuckerberg has already announced billions in investments in the project and corresponding effects on profits. In the current year, the profit should therefore be reduced by around ten billion dollars. “We will increase investments in the years to come,” said Zuckerberg. This should create 10,000 new jobs in Europe alone.

Further details on the project are expected this Thursday. Then, according to media reports, a new name will also be announced for the group.

Allegations of beautified user statistics

The Metaverse is the central strategy for Facebook to maintain its market power on the Internet in the long term. Most recently, the group had to struggle with strong competition from the Tiktok and Snapchat platforms, especially among younger users.

The numbers on Facebook are still unprecedented, with around 3.58 billion users who, according to the company, log in to Facebook, Instagram or WhatsApp at least once a month.

The majority of this is still attributable to the parent platform, which has around 2.9 billion monthly (and around 1.9 billion daily) users. With these users, Facebook still promises the advertisers who finance the business model an enormous reach.

However, fake accounts and double registrations of individual users are counted. Facebook itself specifies the proportion of these users, which are in principle worthless for advertising, at ten percent. But some analysts suggest an understatement.

In the course of the publications by the whistleblower Frances Haugen it became known that the number of daily users between the ages of 18 and 24 had been eroding for several years. The number of worthless users should also be significantly higher than officially stated, which the company itself denies.

The situation is threatening

And it wouldn’t be the first time that Facebook had to admit misconduct in retrospect. In 2019, the group already paid around $ 40 million as a comparison sum to advertisers because the statistics for video views were sometimes exaggerated by 900 percent.

The development is threatening – and there are great concerns that Facebook could lose its importance as the largest social network in the world. Other online giants have already experienced a sudden crash before the social media group after a meteoric rise.

On the stock market, however, such worries seem to be minor: the paper had lost a lot of value in the past few weeks. Shortly after the quarterly figures were presented, the Facebook papers rose again despite disappointed analyst expectations. The reason for this is likely to be the announcement of a $ 50 billion share buyback program. After the hours of trading, the share rose by around 2.7 percent.

More: New company name and a metaverse: Facebook wants to score with a new strategy

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