Facebook on Wednesday delivered strong first quarter financial results, largely due to the rising price of ads.
The social media site collects the vast majority of its revenues from ad sales, and the average price per ad in Q1 increased by 30 percent year-over-year. Meanwhile, the number of ads delivered in the quarter grew by 12 percent year-over-year.
"We expect that advertising revenue growth will continue to be primarily driven by price during the rest of 2021," CFO Dave Wehner said in a statement.
All told, Facebook's Q1 net income came to $9.5 billion, with earnings of $3.30 per diluted share. Revenue came to $26.17 billion, up 48 percent year-over-year.
Analysts were expecting earnings of $2.37 on revenue of $23.67 billion.
Advertising revenue for the quarter was $25.44 billion, up 46 percent. "Other" revenue totaled 732 million, up 146 percent.
"We had a strong quarter as we helped people stay connected and businesses grow," CEO Mark Zuckerberg said in a statement. "We will continue to invest aggressively to deliver new and meaningful experiences for years to come, including in newer areas like augmented and virtual reality, commerce, and the creator economy."
Facebook's daily active users were 1.88 billion on average for March 2021, an increase of 8 percent year-over-year. Its monthly active users totaled 2.85 billion as of March 31, an increase of 10 percent year-over-year.
The number of people active daily on at least one of Facebook's products -- including Facebook, Instagram, Messenger and WhatsApp -- was 2.72 billion on average for March, an increase of 15 percent year-over-year. Monthly active people for Facebook's "family" of products was 3.45 billion as of March 31, an increase of 15 percent year-over-year.
Facebook grew its headcount by 26 percent compared to the year prior, with 60,654 employees as of March 31.
While ad sales are booming for Facebook, Wehner said the company continues to expect "increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recently-launched iOS 14.5 update." Apple's mobile OS update should begin having an impact on Facebook's business in Q2, Wehner said.
Earlier this week, Apple officially released iOS 14.5 or iPadOS 14.5 for all iPhone and iPad users. Facebook has complained about the new App Tracking Transparency (ATT) feature, which requires app developers to get permission from a user in order to track their activity across other apps and websites when using an iPhone or iPad.
"Yes, there are challenges coming to personalized advertising, and we've been pretty open about that," COO Sheryl Sandberg said on Wednesday's conference call. More from Sandberg:
We're doing a huge amount of work to prepare. We're working with our customers to implement Apple's API and our own aggregated events measurement API to mitigate the impact of the iOS 14 changes. We're rebuilding meaningful elements of our ad tech so that our system continues to perform when we have access to less data in the future. And we're part of long-term collaborations with industry bodies like the W3C on initiatives like privacy enhancing technologies that provide personalized experiences while limiting access to people's information. It's also on us to keep making the case that personalized advertising is good for people and businesses, and to better explain how it works so that businesses don't have to understand the alphabet soup of acronyms they'll need to comply with. But they do need to have confidence that they can still use our tools to reach the people who want to buy what they're selling in a privacy-safe way. We're confident they can and that they can continue to get great results as digital advertising evolves.
Wehner added on the call that "the impact on our own business we think will be manageable... The goal is to maintain and, in the long run, even improve [ad] performance with less data."
He continued, "Overall, the impact of these specific iOS 14 changes are one element of some of the challenges with Apple, but we think the impact of the Apple approach is really much bigger than this particular update. Apple has a number of private APIs on hardware and software that advantage their own products and services in ways that are challenging. We face that issue in places like our messaging products, and even with the hardware products we're launching. So we generally don't think this closed approach is the best one for the industry from an innovation perspective."
In terms of other challenges facing Facebook, Wehner said there is also "continuing uncertainty around the viability of transatlantic data transfers in light of recent European regulatory developments."
In spite of the challenges, Zuckerberg said on Wednesday's conference call, the company's better-than-expected performance in recent quarters "has given us the confidence to increase our investments meaningfully and in a few key areas that have the potential to change the trajectory of the company over the long term."
Those areas include augmented reality and virtual reality, commerce and supporting creators.