After suffering significant reductions in adspend in March alongside the rest of the advertising industry, Facebook has reported that ad revenue growth will be "flat" this month as the economic impact from coronavirus lockdown appears to have stabilised.
The social media behemoth reported 17% ad revenue growth to £17.44bn for the first three months of the year (or 19% on a constant currency basis).
This was a more impressive performance than analysts expected, given the toll the pandemic has taken on the global ad industry as advertisers have reduced spend significantly. Facebook’s ad revenue growth for the same period in 2019 was 26%; reporting 17% growth in the first quarter of 2020 amid the coronavirus outbreak helped boost the company’s stock by 10% in after-hours trading this morning.
"We experienced a significant reduction in the demand for advertising, as well as a related decline in the pricing of our ads, over the last three weeks of the first quarter of 2020," Facebook’s earning report said.
However, this fall in ad revenue appeared to have stabilised in April, the company added: "After the initial steep decrease in advertising revenue in March, we have seen signs of stability reflected in the first three weeks of April, where advertising revenue has been approximately flat compared to the same period a year ago, down from the 17% year-over-year growth in the first quarter of 2020.
"The April trends reflect weakness across all of our user geographies as most of our major countries have had some sort of shelter-in-place guidelines in effect."
User growth continues with double-digit growth (albeit self-reported by Facebook): daily active users for March were 1.73 billion on average (up 11% year on year) and monthly active users were 2.6 billion as of 31 March (up 10% year on year). The company does not break this number down into Facebook, Instagram and WhatsApp users.
However, eMarketer principal analyst Debra Aho Williamson warned that April’s flat revenue suggested that the second quarter will be a much more challenging quarter than January-March.
She said: "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."
Facebook has worked hard in recent years to increase the proportion of its ad revenue from small and medium-sized businesses – the so-called "long tail" advertising community – that could benefit most from self-serve ad formats that enable precise audience targeting. The company now has 140 million small business advertisers globally.
While one might expect small and medium-sized businesses' adspend to have been hit particularly hard by the economic shock caused by coronavirus, chief operating officer Sheryl Sandberg was able to point to some positive behaviour from the gaming and ecommerce sectors, while travel and car advertising have been badly affected.
Sandberg said: "We've seen strong growth in gaming and relative stability in technology and ecommerce, which is one of our largest sectors. There are few contributing factors here. First, as people stay at home, these sectors are seeing more use of their products and services. Second, advertisers in these sectors tend to optimise for measurable objectives and we are generating sales at lower prices due to the overall reduction in ad demand.
"On the other hand, we've seen significant declines in travel and auto, as these industries have been hit particularly hard… Companies of all types are adapting to a world where people aren't walking into their stores or seeing their brand on billboards."
Meanwhile, founder and chief executive Mark Zuckerberg reiterated his focus on building out WhatsApp as an ecommerce platform, given the company’s recent decision to give up on monetising through traditional ad formats.
Zuckerberg said: "For commerce on WhatsApp more broadly, we're very focused on making it, so that small businesses can have a presence on all of the apps – Facebook, Instagram, WhatsApp and Messenger – and can communicate organically with people and then increasingly can do things that can help them drive transactions.
"So we started rolling out things like catalogues in WhatsApp, we're working on payments to be able to complete transactions and we've rolled out a new ad format, 'click to messaging' ads, where basically a lot of small businesses and different businesses are finding that their message threads with people perform better for driving sales than their websites or other presences; they basically buy ads inside Facebook or Instagram and send people through chat threads."