Social networking company Facebook reported a 53 per cent year-on-year rise in fourth quarter net profit as its advertising business boomed in the second half of 2020.
Net profit surged to $11.2 billion in the three months to December 31, almost 43 per cent up on quarterly basis. Revenue during the period soared 33 per cent to more than $28bn.
"We had a strong end to the year as people and businesses continued to use our services during these challenging times," Mark Zuckerberg, founder and chief executive of Facebook, said.
"I am 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," he added.
Facebook’s stock was little changed in extended trading, after falling 3.5 per cent in New York to close at $272.14 a share. Its shares have gained almost 25 per cent in the past 12 months and close to 5 per cent since the start of this year.
The platform's daily active users grew 11 per cent yearly to reach 1.8 billion in the last quarter. Its monthly active users increased 12 per cent to 2.8 billion.
"Facebook’s active users grew more than expected and its fourth quarter sales jumped … thanks to a more prosperous advertisement business as online sales remain strong due to the extended pandemic and the new stay-at-home lifestyle," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.
While the pandemic upended many businesses globally, Facebook said its operations benefited from two trends playing out during the health crisis. These include the "shift towards online commerce" and the "shift in consumer demand towards products and away from services".
"We believe these shifts provided a tailwind to our advertising business … looking forward, a moderation or reversal in one or both of these trends could serve as a headwind to our advertising revenue growth," Facebook chief financial officer David Wehner said.
The company said it will continue to face "significant uncertainty" this year.
"We expect to face more significant ad targeting headwinds in 2021. This includes the impact of platform changes, notably [Apple’s] iOS 14, as well as the evolving regulatory landscape," Mr Wehner said.
While the timing of the iOS 14 changes remains uncertain, Facebook expects to see an impact late in the first quarter.
Changes to Apple’s iOS 14 software on the iPhone will require apps to ask for explicit user permission before tracking their activity. Mr Wehner said many users will opt out of this tracking.
Mr Zuckerberg criticised Apple for rolling out this new feature, saying it would make it harder for Facebook advertising customers to target their messages.
"Apple may say that they’re doing this to help people, but the moves clearly track their competitive interests," he said.
Facebook’s capital expenditure for the fourth quarter and the full 2020 fiscal year was $4.8bn and $15.7bn, respectively.
The company predicts 2021 capex to be in the range of $21bn to $23bn, driven by spending on data centres, servers, network infrastructure and office facilities.
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Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
What drives subscription retailing?
Once the domain of newspaper home deliveries, subscription model retailing has combined with e-commerce to permeate myriad products and services.
The concept has grown tremendously around the world and is forecast to thrive further, according to UnivDatos Market Insights’ report on recent and predicted trends in the sector.
The global subscription e-commerce market was valued at $13.2 billion (Dh48.5bn) in 2018. It is forecast to touch $478.2bn in 2025, and include the entertainment, fitness, food, cosmetics, baby care and fashion sectors.
The report says subscription-based services currently constitute “a small trend within e-commerce”. The US hosts almost 70 per cent of recurring plan firms, including leaders Dollar Shave Club, Hello Fresh and Netflix. Walmart and Sephora are among longer established retailers entering the space.
UnivDatos cites younger and affluent urbanites as prime subscription targets, with women currently the largest share of end-users.
That’s expected to remain unchanged until 2025, when women will represent a $246.6bn market share, owing to increasing numbers of start-ups targeting women.
Personal care and beauty occupy the largest chunk of the worldwide subscription e-commerce market, with changing lifestyles, work schedules, customisation and convenience among the chief future drivers.
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Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
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Rating: 3.5/5
How The Debt Panel's advice helped readers in 2019
December 11: 'My husband died, so what happens to the Dh240,000 he owes in the UAE?'
JL, a housewife from India, wrote to us about her husband, who died earlier this month. He left behind an outstanding loan of Dh240,000 and she was hoping to pay it off with an insurance policy he had taken out. She also wanted to recover some of her husband’s end-of-service liabilities to help support her and her son.
“I have no words to thank you for helping me out,” she wrote to The Debt Panel after receiving the panellists' comments. “The advice has given me an idea of the present status of the loan and how to take it up further. I will draft a letter and send it to the email ID on the bank’s website along with the death certificate. I hope and pray to find a way out of this.”
November 26: ‘I owe Dh100,000 because my employer has not paid me for a year’
SL, a financial services employee from India, left the UAE in June after quitting his job because his employer had not paid him since November 2018. He owes Dh103,800 on four debts and was told by the panellists he may be able to use the insolvency law to solve his issue.
SL thanked the panellists for their efforts. "Indeed, I have some clarity on the consequence of the case and the next steps to take regarding my situation," he says. "Hopefully, I will be able to provide a positive testimony soon."
October 15: 'I lost my job and left the UAE owing Dh71,000. Can I return?'
MS, an energy sector employee from South Africa, left the UAE in August after losing his Dh12,000 job. He was struggling to meet the repayments while securing a new position in the UAE and feared he would be detained if he returned. He has now secured a new job and will return to the Emirates this month.
“The insolvency law is indeed a relief to hear,” he says. "I will not apply for insolvency at this stage. I have been able to pay something towards my loan and credit card. As it stands, I only have a one-month deficit, which I will be able to recover by the end of December."
The Library: A Catalogue of Wonders
Stuart Kells, Counterpoint Press
How it works
1) The liquid nanoclay is a mixture of water and clay that aims to convert desert land to fertile ground
2) Instead of water draining straight through the sand, it apparently helps the soil retain water
3) One application is said to last five years
4) The cost of treatment per hectare (2.4 acres) of desert varies from $7,000 to $10,000 per hectare
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
