Facebook’s ad business poised to post another strong quarter

The social-media company’s second-quarter earnings report, due Wednesday afternoon, should show that advertisers’ greater focus over the past year on reaching consumers online continues to be a tailwind. The parent of Facebook, Instagram and WhatsApp also likely benefited from a rise in consumers making purchases from brands directly through its apps, analysts say. However, the company suffered a blow last month when its longtime head of global ad sales, Carolyn Everson, announced her resignation.

Facebook’s revenue is projected to rise 49% from a year earlier to $27.85 billion, according to analysts polled by FactSet. Profit is projected to rise 69% to $8.76 billion, or $3.04 a share.

The anticipated strong results come as Google parent Alphabet Inc. on Tuesday reported its best quarter ever for sales and profit, bolstered by a strong digital advertising market. Last week, Snap Inc. said its revenue more than doubled in the second quarter and user growth jumped the most in four years, while Twitter Inc. said sales rose 74% and that it swung to a profit from a year earlier.

Facebook’s stock has gained about 21% over the past three months, compared with roughly 5% for the S&P 500 index.

The June-ended quarter wasn’t without controversy for Facebook. The tech giant drew sharp criticism from President Biden, who said it wasn’t doing enough to stop the spread of vaccine misinformation on its platforms. Facebook countered that it was doing its part to help get more Americans vaccinated, such as by operating pop-up vaccine clinics in several low-income and underserved communities.

Former President Donald Trump also took a swing at Facebook, suing the company as well as Google Inc.’s YouTube and Twitter earlier this month for removing him from their platforms in response to posts he made around the time of the Jan. 6 riots at the U.S. Capitol. Mr. Trump has claimed he has been wrongly censored by them in violation of his First Amendment rights. Facebook didn’t comment on the suit, which was filed in U.S. District Court in Miami.

Facebook remains in legal battles with U.S. regulators over its size. The Federal Trade Commission and 46 states in December filed antitrust lawsuits against Facebook, accusing it of buying and freezing out small startups to stifle competition. Facebook has sought to dismiss both lawsuits, saying the FTC’s case aims to rewrite history and ignores the tech industry’s competitive dynamics and that the states’ case doesn’t prove that “citizens paid higher prices, that output was reduced or that any objective measure of quality declined as a result of" the company’s actions.

With Facebook’s forthcoming results, analysts say they anticipate an update from management on the impact of Apple’s new privacy rules on its ad tracking capabilities, as well as efforts to expand its business to include areas such as e-commerce and augmented and virtual reality. The company recently announced it was developing a product group focused on the “metaverse," a buzzy term that refers to a collection of immersive digital worlds that isn’t controlled by any one entity.

Earlier this month Facebook pledged to pay more than $1 billion to content creators on its social networks through 2022, joining its social-media peers who have made big-dollar commitments over the past year to invest directly in people responsible for boosting engagement among users. The move reflects a bet that monetary rewards will serve as a sweetener for those deciding which platforms to focus their energy on.

Great content “creates a lot of stickiness," said Benchmark analyst Mike Hickey. “Any way you can motivate your community to contribute more is probably the best way to drive lasting engagement, which drives monetization."

Facebook reported its main platform had 1.88 billion daily users and 2.85 billion monthly users in the first quarter. Analysts expect those numbers to increase modestly in the second quarter, including in the U.S. and Canada.