Google, Facebook and Twitter have all issued warnings that their financial results for the first quarter of the year are set to be lower than their original forecasts. This will be due to the effects of the coronavirus pandemic across the globe. Furthermore, analysts believe that this year will see a weakened level of ad demand as well.
Despite these financial shortcomings, social media sites, video streaming services and other online platforms are all reporting an increase in usage.
Facebook has reported a massive 50% in messaging on the platform in countries where COVID-19 is having the greatest effect. Italy experience an increase of 70% in time spent across the company’s apps.
Twitter also reported an increase in the number of active users, with the company showing a 23% increase in year-on-year users and an 8% rise in quarter-to-quarter users.
As governments are imposing lockdowns across the world, people are spending more time indoors and on their devices. Video streaming services and video calling platforms have also reported increases in the number of users.
Normally, an increase in user numbers for many of these businesses would also result in a rise in ad revenue. However, in these rare and unprecedented times, this has not been the case. With some major advertisers temporarily closing or cutting costs, this has led to a lower ad spend despite user numbers soaring.
With advertisers unable to capitalise on the additional ad space available through the increase in user numbers, this will correlate to a decrease in projected revenues for the tech giants. Twitter may see a loss of revenue in the region of 10-15% despite having 23% more daily users. Facebook confirmed that it is also seeing an increase in active users and a weakening of ad revenue due to the spread of the coronavirus, without giving any specific details.
Cowen & Company has estimated that Facebook and Google will experience an ad revenue drop of $44m (£34.9m). This would represent an 18% dip for Google and a 19% revenue decline for Facebook. The analyst does expect that ad business will bounce back next year.
Should these estimations prove to be accurate, this would be the first time that Facebook and Google would have to report a negative year-on-year revenue since they were founded in 2004 and 2001 respectively.
LightShed has pointed out that digital ad spend will see the effects of the situation immediately, whereas it would take longer for television ads to see the effects, as they are planned months in advance.
However, as the COVID-19 pandemic only started making major interruptions in March, it is expected that these financial implications will continue deep into Q2 and possibly Q3. Some experts are not expecting to see ad spending return to the pre-pandemic levels until next year at the earliest, as advertisers are under extreme scrutiny when it comes to balancing demand for products and services, furloughing staff and managing cash flow.
This weakening of the ads market could play nicely into the hands of those businesses that are thriving and pivoting during the pandemic. Those who are experiencing a spike in custom, or who believe they can adapt to make the most of these circumstances, can get ahead of their competition by taking advantage of digital ads now. It may prove to be beneficial in the long run as more people are spending time online, making for a larger potential audience for your targeted adverts.
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