Facebook confirms release of Ray-Ban smart glasses
- Facebook revenue soars by 56% in Q2 2021 as it cashes in on COVID lockdowns
- Wall Street not impressed by Facebook’s earnings
- Social media giant invests heavily in AR technology to support its “metaverse” ambitions
- Mark Zuckerberg confirms the release of Ray-Ban smart glasses
Social media giant, Facebook, recorded its fastest quarterly growth since 2016 in Q2 2021 despite ongoing regulatory pressures and criticism surrounding false information on the social networking service.
Facebook said revenue rose to USD 29BN from three months to June, beating preliminary estimates of USD 27.89BN. Its earnings report also revealed that annual profits doubled year-on-year to USD 10BN, with the boom in online advertising driving growth.
As many businesses were shuttered during the worst of the coronavirus pandemic, more people were using smartphones and technology during COVID lockdowns, which Facebook benefited from significantly.
The tech giant said the number of people using its services rose to 2.9BN between April and June, with all of its profits coming primarily from targeted ads.
Despite solid revenue figures, the social media networking company expects year-on-year revenue growth to slow considerably on a sequential basis.
UBS analyst John Hodulik noted that outperformance was underwhelming compared to Snapchat and Twitter, both of which beat quarterly expectations by far more significant margins.
Mr Hodulik noted that Facebook executives also downplayed potential headwinds to its ad business from Apple’s changes earlier this year to restrict the Zuckerberg-owned company from tracking iOS users.
Facebook shares fell by 4% following the publication of the earnings report and warnings from Chief Financial Officer (CFO) David Wehner about expectations for annual revenue growth.
Traders and investors had kept share prices in a relatively narrow range before the report was published but were left disappointed. Shares in the company closed 4.01% lower on Thursday at 358.32
The Biden administration has heavily criticised the tech firm in recent weeks over the spread of misinformation about COVID-19.
Still, the company’s blockbuster growth in 2021 further highlights the view that “Facebook is an industry leader in all the categories it competes in”, said Investing.com analyst Jesse Cohen.
Facebook’s impressive performance follows record-setting figures from Apple, Google’s parent Alphabet, Microsoft and Tesla. While Amazon missed expectations on Thursday, its Q2 earnings report showed an acceleration in growth for its Web Services, which is already leading in the cloud infrastructure business.
Although analysts have forecast a weaker Q3 for Facebook, Mark Zuckerberg’s ambitions to create a “metaverse” is expected to unleash a wave of new opportunities for the social media firm.
The metaverse project aims to bridge the gap between artificial reality (AR) and virtual reality (VR) to create a fully immersive experience where users can inhabit both digital worlds.
Facebook said it would pay USD 1BN to creators over the next 12 months to accelerate the process and encourage more original content for the social media platform.
While it is a costly investment, the company believes it is vital for future growth, citing recent transformational trends such as the rise in video content, expansion of non-fungible tokens (NFTs) and increased demand for VR and AR.
Facebook noted that growth for Q2 had been driven by the rise of video content, which it said accounts for 50% of all time spent on the platform. It imitated TikTok with short video feature reels, which was also proven to boost engagement levels on Instagram.
However, while plans to innovate virtual and augmented reality worlds are presenting growth opportunities, the company must also address growing regulatory issues.
Facebook has mounting regulatory hurdles to address
In recent weeks we have seen Facebook criticised by the German court, the Biden administration and several watchdogs for how it moderates content, handles censorship and manages data.
Earlier this year, US President Joe Biden condemned the social media network for misinformation surrounding coronavirus vaccines. Democrat Senator Amy Klobuchar later introduced a bill targeting the issue, which could spell legal trouble for Facebook.
The Federal Trade Commission (FTC) could also refile a complaint against the tech firm after a US judge extended the deadline on the antitrust lawsuit.
The newly appointed FTC Chair has openly criticised the platform in the past, vowing to crack down on technology monopolies.
Mounting regulatory pressures and antitrust scrutiny could become a significant threat for Facebook in the coming quarters, especially amid the White House’s plans to increase competition for small tech companies.
Apple’s new privacy controls have also created headwinds by limiting Facebook’s ability to track the iOS users’ journey.
The social media firm admitted that Apple’s changes will more than likely harm revenue for the third quarter and has already factored into its projections how this could affect performance.
If users opt-out of tracking, this will inhibit Facebook’s ability to deliver target ads, which make up a significant proportion of revenue.
Although some technology firms have introduced measures to mitigate the impact, Paolo Pescatore, an analyst at PP Foresight, said: “All will see a negative impact longer-term.”
The social media firm has also been investigated over its handling of data in countries across the Atlantic. For example, the Irish Data Protection Commission launched an investigation back in April after millions of Facebook users had their information leaked online.
A top German court has also pushed for stricter content moderation after the social media firm acted illegally by taking down racist posts and blocking accounts without adequately informing the authors.
The US-based firm said it was cooperating with the relevant authorities on the matter.
Despite concerns over the escalating regulatory crackdown and privacy breaches, Mr Zuckerberg continues to press ahead with plans to transform his company from a social media network to a “metaverse” firm.
What is a Facebook metaverse?
A metaverse is a “successor state” to the modern internet that allows people to game, work and exchange information in a virtual environment.
Author Neal Stephenson described the metaverse as “a global, interconnected galaxy of virtual worlds, avatars, online communities, and mixed reality.”
Mark Zuckerberg referred to it as “an embodied internet where instead of just viewing content – you are in it. It creates the feeling that you are genuinely there with another person.”
The Facebook CEO stressed the growing importance of transforming the social media platform into a metaverse to investors during a Q2 earnings call, highlighting the shift in consumer behaviour as people come away from photos favouring video content.
Video content is not only generating the most engagement on Facebook but Instagram, too, according to an Engadget report.
Mark Zuckerberg said that Facebook had invested heavily in virtual reality over the past few years, including a USD 2BN (GBP 1.4BN) investment into VR firm Oculus.
Facebook hopes to make its metaverse accessible across various devices and apps to allow users to engage in a range of experiences with friends, including gaming, working and other immersive entertainment.
Zuckerberg added: “They’ll be able to use it how we use the internet today and to do some things that we can’t do on the internet such as dancing.”
He noted that users would also be able to create avatars and digital objects while inside the virtual world, which he believes will be central to creative expression.
However, readers should note that talks about Facebook’s metaverse have failed to mention anything about encompassing cryptocurrency or blockchain technology, which is all the frenzy in 2021.e
Although there has been no explicit mention of using blockchain technology in the metaverse, experts believe that Facebook will link its upcoming Diem crypto project to its virtual reality initiative.
In an update to investors, he said he expects to spend USD 21BN on the project in 2021, which will include spending on the development of new products, data centres and servers.
His metaverse ambitions have attracted scrutiny from regulators, who are trying to clamp down on the dominance of tech giants.
UK regulator Digital Markets Unit (DMU) recently introduced new codes of conduct to increase competition in the UK.
Meanwhile, US President Joe Biden signed a new executive order to increase competition on US soil and increase regulation of Big Tech companies after suggesting that these firms collect too much personal data and compete unfairly with small technology companies.
The executive order also offered recommendations over greater scrutiny of mergers and acquisitions in the tech industry to crack down on anti-competitive behaviour in the marketplace.
Yet, this week Facebook confirmed bolder augmented reality ambitions, namely the release of its long-awaited Ray-Ban smart glasses.
Mark Zuckerberg confirms the release of Ray-Ban smart glasses
Facebook has confirmed the launch of Ray-Ban smart glasses, which is part of broader plans to boost user engagement by transforming its social media platform into a metaverse.
The smart glasses will allow owners to do “some pretty neat things”, said Mark Zuckerberg. He added: “I’m excited to get these on the market and continue progressing on the journey towards fully augmented reality glasses in the future.”
Mr Zuckerberg has refrained from giving too much away about the smart glasses, but there have been rumours about them coming complete with cameras and other AR technology.
However, given that the new venture, dubbed “Project Aria”, is in its early stages, many suspect the device will fall under the wearable notifications device category and function under a similar system to the Amazon Echo device.
Nonetheless, smart glasses, which Google pioneered, are expected to be a key player in creating a virtual environment. Facebook hopes that by utilising Ray-Ban’s iconic form, its smart glasses will be received better by consumers than models manufactured by Google and Snap.