Facebook Q2 Earnings Preview: Ad Sales, Libra To Affect Growth

It’s been a wild couple of weeks – or months – for Facebook. Amid privacy concerns, Senate hearings and Libra drama, it’s time for the company to translate it all into their second-quarter earnings report, which is set to publish on Wednesday (July 24).

Experts predict a muted growth report, and advise looking closely at the ramifications of Libra and its growth in advertising sales over the quarter, which is threatened by Amazon’s expansion in the industry.

The report could mimic the company’s first-quarter earnings, which beat expectations on revenue and daily user growth but was weak on earnings due to the ongoing Federal Trade Commission (FTC) investigation into Facebook and Cambridge Analytica.

Facebook reached a settlement with the FTC in July, resulting in a $5 billion fine – far over the $3 billion expected. The settlement also included guidelines for how the company should handle its users’ privacy in the future.

Despite the negative impact the investigation had on Facebook’s first-quarter earnings, the company’s stock rose after they released their report, leaving analysts uncertain of how the fine would affect its stock post-second-quarter earnings.

The news of Libra and its aftermath will have a major effect on the company’s earnings this quarter, but whether it will be good or bad is still uncertain. Facebook’s David Marcus was grilled and the cryptocurrency was criticized in hearings with the Senate Banking Committee on July 16, and by the House Financial Services Committee on the following day.

The Senate’s hearing ended with a lack of clarity on what data Facebook would collect from Calibra transactions, including financial habits of users, and how the company would ensure both national and personal security. (For those who missed it, PYMNTS published a recap of Libra’s week in Washington.)

Libra is running into reticence internationally as monetary organizations all over the world are raising concerns of regulatory obstacles and tax challenges. The domestic value of the holdings in a Libra user’s wallet would change every time the global exchange rate fluctuations, incurring capital gains and losses with every purchase.

The announcement of Libra motivated the Group of Seven Nations (G7) to call for an investigation into the potential risks of cryptocurrency and how they would affect the current financial system.

Individual countries are also organizing their own investigations; Japanese authorities announced the creation of a task force to study the impact of Libra on monetary policy and financial stability.

Alongside the tide of Libra talk, Facebook is still confronted with privacy concerns and data breach issues. On April 17, it was revealed that Facebook had used user data as leverage with other countries, rewarding some with access to the data and withholding it from rival firms.

The next day, the tech giant admitted that millions of Instagram passwords were available to be seen by company employees in a database, an update to a post back in March stating that it had only affected “thousands” of Instagram accounts.

This data breach has not discouraged users, as user engagement continues to rise, according to CNBC. Nor has it discouraged Facebook, which is continuing to collect data – openly, this time – via its market research app, Study From Facebook, which collects information such as what apps a person has on their phone and how much time they spend on each app.

Facebook will release its second-quarter earnings report at 5 p.m. EST on Wednesday. We can expect the unexpected as the company continues to expand amid skepticism and criticism.