【Financial Analysis Facebook Q1 2021 Earnings Review.】



In recent years, social networking services (SNS) have made tremendous progress due to the increased innovation in technology, and the possibilities for people to connect with each other have expanded dramatically. Facebook is the world's largest social networking service operator, providing a platform for the world to connect more closely. The number of active Facebook users worldwide is said to be more than 2.8 billion per month, and the company has built a dominant position that is synonymous with social networking.


On April 28, 2021, Facebook announced its financial results for the first quarter (January-March) of fiscal year 2021. The company's business consists of 1) advertising, and 2) payments and commissions. Sales increased 48% YoY to 26.17 billion dollars. Of this, advertising expenses were $25.44 billion, up 46% YoY. Operating income increased 93% YoY to $11.38 billion. Net income was $9.50 billion, up 94% YoY. The company's unique feature is that the advertising business accounts for over 98% of its sales. The company's advertising business accounts for more than 98% of its sales, and the business as a whole performed well this quarter, including its core advertising business. Let's take a look at the factors behind the strong performance and the outlook for the future.





One of the main factors is direct marketing. Direct marketing is a marketing method in which a company connects directly with customers through advertising and media, encourages specific actions such as purchase inquiries, and measures the response as data. Digital advertising is a good match because it is easy to measure cost-effectiveness using data and to implement the PDCA cycle, and Facebook is constantly working on ways to use data to effectively advertise to users. This resulted in a 30% increase in the average unit price of ads compared to the same period last year, and a 12% increase in the number of ads served.

The next factor is the strong marketplace. A marketplace is a platform that facilitates commerce between individuals, and the number of users is key. Daily active users (DAUs) grew 8% YoY to 1.88 billion, and monthly active users (MAUs) grew 10% YoY to 2.85 billion, including 1 billion monthly marketplace users. In addition, Facebook has its own applications such as Messenger, WhatsApp, Instagram, etc., and the total number of users exceeds 3.45 billion. It is truly the most used SNS in the world.




Due to the above factors, Facebook had a strong performance this year, but it is also said that the future forecast is on a decelerating trend.

There are two main factors: 1) the impact of the prolonged pandemic and 2) regulatory issues. In particular, it is said that the impact of regulatory issues will be largely reflected. Most notably, Apple's privacy changes in iOS 14 made it more difficult to personalize ads for iPhone and iPad users. This iOS 14 change is expected to start affecting Facebook's ad targeting in Q2, so we can say that Q3 and Q4 are expected to see a slowdown.

The results of the first quarter of 2021 were as strong as the name of the world's largest social network operator. However, the significance and value of social networking sites and Mark Zuckerberg's management skills will once again be questioned as to how to deal with regulatory issues that will have a greater impact than a pandemic.




【Financial Results for the First Quarter of 2021】 - Net sales: $26.17 billion (+48% YoY) Advertising: $25.44 billion (+46% YoY) Others: $0.73 billion (+146% YoY) - Operating profit: $11.38 billion (+93% YoY)  Operating margin: 43% (vs. 33% in the same period last year) - Net income: $9.50 billion (+94% YoY) - EPS: $3.30 (+93% YoY) - Operating cash flow: $12.24 billion (+11% YoY) - Free cash flow: $7.82 billion (+6% YoY)


【KPIs】 - Facebook Daily Active Users (DAU): 1.88 billion (+8% YoY) - Facebook Monthly Active Users (MAU): 2.85 billion (+10% YoY) - Advertising Business Average ad unit price (+30% YoY) Number of ads delivered (+12% YoY)


【Net Sales by Region】 - U.S. & Canada: $12.41 billion (+45% YoY) - Europe: $6.52 billion (+53% YoY) - Asia Pacific: $4.79 billion (+47% YoY) - Other regions: $2.45 billion (+47% YoY)