Facebook Posts Slower Sales Growth

Facebook’s ad sales, its primary revenue source, saw slower growth in the first full quarter since Apple in April started requiring apps to ask users whether they want to be tracked. The Wall Street Journal reports that change has made it harder for advertisers to target their ads at audiences and get information regarding how well their ads performed.

Facebook Chief Executive Mark Zuckerberg, on an analysts call, also addressed Facebook’s growing competition for young adult users from Apple’s iMessage app and the rise of ByteDance Ltd.’s TikTok, saying that retaining and adding members of this demographic segment is essential for the company’s long-term success.

In addition to the digital-ad industry disruption from Apple’s change to its iOS mobile-operating system, Facebook has faced a firestorm of criticism from lawmakers, academics and users over revelations in The Wall Street Journal’s “Facebook Files” series, which showed that the company knows that its platforms are riddled with flaws that cause harm. Those articles spurred congressional hearings, prompted a rebuke from Facebook’s own oversight board and led the company to halt work on a version of its Instagram app focused on children.

Facebook had previously warned that Apple’s privacy changes to its iOS operating system could crimp ad-targeting capabilities in the third quarter, as more people update their iPhones and iPads. Last week Snap Inc. blamed the Apple policy for an expected slowdown in revenue growth for the current quarter, leading its stock price to fall more than 20%.

Zuckerberg on Monday pushed back against recent criticism of the company.

“I’m proud of our record navigating the complex trade-offs involved in operating services at global scale,” he said. “It makes a good sound bite to say that we don’t solve these impossible trade-offs because we’re just focused on making money, but the reality is these questions are not primarily about our business, but about balancing different difficult social values.”

Third-quarter revenue reached $29.01 billion, up 35% from the year-earlier period but below the $29.56 billion that analysts polled by FactSet were expecting. That increase was the smallest since last year’s fourth quarter and well below the 52% rate over the first half of this year.

Ad revenue declined slightly from the second quarter, including in the U.S. and Canada, its largest combined market segment. European sales also slid from the prior quarter.

Facebook’s third-quarter profit rose 17% to $9.19 billion. The company said it had 3.58 billion monthly users across Facebook, Instagram, and its other services—up 12% from a year earlier.