With all the craziness that existed in the world during 2020, Facebook (NASDAQ:FB) managed to have a good year in terms of its business performance. Although out of its direct control, the pandemic-related stay-at-home orders led to a record number of people logging on to Facebook to pass the time.

Despite this tailwind, it shouldn't be overlooked that 2020 included a recession and significant uncertainty in the economy. How will Facebook fare as it moves forward into 2021?

Facebook is a recession-resilient stock

As mentioned, 2020 included a brief but sharp recession during the second quarter of the year. This matters for Facebook because it primarily makes money by selling advertising, and advertising is generally thought to be an economically sensitive industry.

A person using a smart phone with thought bubbles above the phone

Image source: Getty Images.

But you wouldn't be able to tell that it was a recessionary year by looking at Facebook's financial statements. The company saw revenue increase by 22% during the first nine months of 2020, compared to the same period in 2019.

The pandemic, while being a source of a lot of personal and economic strife around the world, did provide a boost to Facebook's growth in certain ways. Notably, people under stay-at-home orders had fewer alternatives to fill their day and turned to log on to Facebook to connect with their friends and family. This helped Facebook achieve a record 1.82 billion daily active users on its platform, a 12% increase over the prior year.

Most of Facebook's growth during the year was driven by additional users. For example, the company saw its average revenue per user only increase 6% to $6.76 during Q3 2020 compared to Q3 2019. This reflects a degree of caution among advertisers to bid less aggressively on ads than they otherwise would in a strong economy, subduing advertising growth rates. Nonetheless, Facebook's financial performance was quite impressive.

Facebook continues to invest for the future

In 2020, Facebook did not take its foot off the gas pedal when it came to investing for the future. During recent earnings calls, the company detailed all the investments it is making for future growth, including hiring more people for platform content moderation, building better tools for small businesses, and better integrating the messaging tools across its various platforms and apps.

One major initiative has been the company's effort to provide e-commerce solutions to small businesses on Facebook and Instagram. In 2020, the company launched Facebook Shops, which provides tools for merchants to sell their products directly on Facebook. The company also added a shopping tab to its popular Instagram app. These e-commerce initiatives could help Facebook diversify its business model, which currently relies heavily on online advertising.

Another really cool initiative has been Facebook's virtual reality platform. The company launched the Oculus Quest 2 in 2020 -- its latest hardware enabling people to explore virtual reality worlds and play highly immersive games. It's still the early days for the potential for virtual reality, but Facebook already has one of the most promising platforms in the industry.

Rising investment risks cloud Facebook's outlook

No discussion of Facebook could be considered complete without mentioning the risks associated with the business -- and there are many.

For starters, Facebook is currently facing an antitrust lawsuit from the FTC for anti-competitive behavior. The lawsuit, filed in December, focuses on how Facebook has acquired rivals including Instagram and WhatsApp in an effort to potentially stop competitive threats. If Facebook is found to be a monopoly, it may have to break-up by selling or spinning-off WhatsApp or Instagram (or both). This antitrust lawsuit is obviously a big deal and could have major implications for Facebook shareholders but the outcome will likely take many years to play out in the courts.

Another major issue that Facebook encountered in 2020 was advertiser boycotts over the content on its platforms. Over the summer, the 'Stop Hate for Profit' campaign convinced over 1,000 large companies to pause their advertising campaigns on Facebook until the company made some effort to better moderate its platforms to limit hate speech and other sensitive content posted by users. Ultimately, the advertising boycott had a limited financial impact on the company, but Facebook did come to the bargaining table to make some concessions to invest in enhanced content moderation. There is always a risk that advertisers could choose to stop spending on the platform again in the future if content moderation doesn't improve to their satisfaction.

Finally, Facebook faced increased competitive threats in 2020 from up-and-coming companies including Pinterest, Snap, and TikTok. TikTok, in particular, has grown a massive user base in a short period of time due to the popularity of its short-form video format. Facebook responded to the TikTok threat by creating its own version of the short-form video feature within the Instagram app, but TikTok remains popular to this day.

Pinterest and Snap have also presented themselves as relevant competitors as they have both been growing their user base and sales at a faster clip than Facebook. This implies that Pinterest and Snap are both taking market share from Facebook due to their faster growth. It is worth pointing out that the issue of rising competitive threats somewhat contradicts the FTC lawsuit that Facebook is a "monopoly" threat.

Heading into 2021...

Clearly, everything hasn't been roses and sunshine for Facebook in 2020 and there are a number of risks for investors to consider. However, Facebook has done an excellent job thus far managing these various issues. Overall, Facebook has a lot going for it -- the company's business has proven resilient in the face of a recession and the company continues to make interesting investments in its future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.