Facebook sees a flattening of ad revenue as coronavirus impacts business

The reduction that happened in March stabilised in April. Facebook these are signs of stability.

Facebook has announced a rising revenue and profit in the first quarter of 2020, but cautioned its advertising business could be impacted by the ongoing coronavirus pandemic (Covid-19).

The ad giant said during the last three weeks of March, it saw a significant reduction in advertising. Facebook said this means its ad business will continue to be affected by “issues beyond our control” and declined to give forecasts about future financial results because of the pandemic.

However, the reduction that happened in March stabilised in April. Facebook said these are signs of stability and that “advertising revenue has been approximately flat compared to the same period a year ago.”

"Many are finding creative ways to engage their customers using our free products – from gyms offering workouts on Facebook Live to stores and restaurants using WhatsApp and Messenger to reach customers with delivery options. In Thailand, when Penguin Eat Shabu closed the doors of its nine restaurants, they started selling to-go boxes," said Sheryl Sandberg, the chief operating officer of Facebook.

"They promoted this with Facebook posts and customers could order through Messenger, and they got 350 sales in one minute. A second offer led to 2,500 hot pot sales. After initially putting their employees on unpaid leave, these sales increased their revenue and helped restore employees to full pay. Marketers of all sizes have more limited budgets, so they need to make every dollar work as hard as possible."

She continued: "That means measuring the value of their advertising is more important than ever, which is something our personalized ads provide. For years we have made major investments in systems and tools that enable businesses to easily understand their return on investment. In the current environment, these investments are paying off."

Debra Aho Williamson, principal analyst at eMarketer said, as expected, Q1 was a decent quarter for Facebook, all things considered. The effects of the pandemic didn’t hit most of the world until mid-March, and that was reflected in Facebook’s earnings report.

However, she noted the fact that revenue was flat in the first three weeks of April indicates that Q2 will be a much more challenging quarter than Q1 was.

“Some countries will be open for business sooner than others, and ad spending will start to rise there, but other countries will remain largely on lockdown into May and possibly beyond. Even within countries, such as in the US, businesses will open up at varying rates, making it incredibly difficult for a company like Facebook to get its ad sales momentum back,” she explained.

“On the usage side, the story for Facebook is better. The strong growth the company demonstrated in both the Monthly Active People and Daily Active People metrics is a sign that using social media remains an important activity for people around the world.”

She added: “But even here, the gains may be short-lived as people gradually get back to their normal lives and have less time—and reason—to log onto Facebook as frequently as they may have in Q1.”

Rival Google's parent company Alphabet Inc announced its first-quarter results the day before, stating that performance was in line with expectations until March when ad revenues slowed down, similar to Facebook's results.

The business still saw a 13% growth for the quarter, compared with last year, when combining the results of its search, Youtube and Cloud business, but the slowdown in ad revenue in March due to coronavirus was “sudden and significant”.

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