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Will International User Growth Aid Facebook (FB) Q4 Earnings?

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Zacks Equity Research
·4 min read
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Facebook FB is set to report fourth-quarter 2020 results on Jan 27.

The company’s growing popularity in international markets, particularly Asia, is expected to have expanded its user base in the to-be-reported quarter.

The Zacks Consensus Estimate for Monthly Active Users (MAU) in Asia stands at 1.185 billion, indicating 14.2% growth from the year-ago quarter’s reported figure.

The consensus mark for Europe is pegged at 416 million, suggesting 5.6% growth from the year-ago quarter’s reported figure.

Additionally, the consensus mark for Rest of World MAU is pegged at 918 million, indicating 12.4% growth from the year-ago quarter’s reported figure.

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

The consensus mark for this Zacks Rank #3 (Hold) company’s fourth-quarter advertising revenues is pegged at $25.77 billion, indicating 24.3% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Facebook, Inc. Revenue (TTM)

 

Facebook, Inc. Revenue (TTM)
Facebook, Inc. Revenue (TTM)

Facebook, Inc. revenue-ttm | Facebook, Inc. Quote

 

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

Ad-Targeting Headwinds to Hurt Ad-Revenue Growth

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

In fact, Facebook in a post stated that Apple’s new iOS 14 AppTrackingTransparency policy will hurt many small businesses.

Markedly, small and medium sized businesses (SMBs) have become a revenue generating source for the social-media giant driven by coronavirus-induced shift in consumer demand for e-commerce services. The company’s initiatives to build tools and functionalities for SMBs are helping them provide e-commerce services to users.

During the to-be-reported quarter, Facebook launched Business Activity Trends, Commuting Zones, Economic Insights from the Symptom Survey and the latest Future of Business Survey results to help researchers, nonprofits and local officials identify which areas and SMBs that might need the most support.

Additionally, intensifying competition for ad-dollars from the likes of Google, Snap SNAP and Twitter remains a headwind.

Instagram, WhatsApp & Messenger Popularity Remains Strong

Facebook witnessed a jump in the usage of its services like Messenger, Instagram and WhatsApp in the fourth quarter amid coronavirus-induced lockdowns and shelter-in-home guidelines.

The company launched new messenger features on Instagram including Watch Together, vanish mode and chat themes such as tie-dye and love so that users can personalize their conversations. Other features include selfie stickers, custom emoji reactions, animated message effects and message controls. These initiatives are expected to have made messenger on Instagram more popular for users.

Moreover, Facebook introduced a Reels tab and a Shop tab on Instagram. The Reels tab allows users to discover short, fun videos from creators all over the world. The Shop tab connects users with brands and creators and helps discover products of their liking.

Additionally, to boost its privacy endeavors, Facebook has launched disappearing messages on WhatsApp.

Markedly, more than 1.4 billion voice and video calls were made on New Year’s Eve 2020 globally; the maximum calls made in a single day on WhatsApp. WhatsApp calling also increased more than 50% compared to the same day last year.

Further, New Year’s Eve 2020 was the biggest day ever for Messenger group video calls (3+ people) in the United States, with nearly 2 times more group video calls compared to an average day.

Additionally, there were more than 55 million live broadcasts across Facebook and Instagram globally on New Year’s Eve.

Facebook's Investment in E-commerce to Boost Growth

Facebook’s investments in e-commerce are expected to have driven growth in the to-be-reported quarter.

The company’s plan to promote e-commerce on WhatsApp platform is also likely to have driven user growth for WhatsApp’s payment services launched in November 2020 in India. Markedly, WhatsApp Pay enables small businesses and individuals in India to buy and sell things through the app.

The company also launched carts to WhatsApp, which allow people to browse a catalog, select multiple products and send the order as one message to the business. This makes it easier for businesses to keep track of order inquiries, manage requests from customers and complete sales process.

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