While the coronavirus pandemic has been adversely impacting a number of tech companies, it seems that one of the world’s largest social media giants has actually faired fairly well in these trying times. Facebook (NASDAQ:FB) announced on Wednesday its most recent quarterly results has managed to exceed expectations significantly. Most importantly of all, advertising revenue stabilized during this quarter, something that was somewhat unexpected considering the turbulence the markets have been seeing for the past while.
In some sense, it makes sense that Facebook would benefit from billions of users being now sitting at home due to the quarantine. Additionally, with person-to-person contact remaining discouraged, it’s not surprising that social media interaction has more or less filled that void in the meanwhile. As such, advertisers are seemingly willing to pay quite a bit more than usual in order to get access to this influx of new users to the platform.
This is pretty big news, as Facebook’s advertising revenue has been on the decline. For this quarter, the company reported around $4.9 billion for earnings, or around $1.71 per share, well above the $0.85 reported back a year ago. Daily active users on the platform increased by 11%, while total revenue for the quarter came in at $17.7 billion. Overall, it’s a welcome surprise considering that many had worried that the company’s decline in advertising revenue would only accelerate during this coronavirus economy.
During this pandemic, Facebook, like most other companies, has promised to pay employees considerably more than they usually would. Besides guaranteeing bonuses for all its employees, the social media giant also said that they would pay its content moderators even when they were not working at home.
Overall, this pandemic has also helped divert media attention away from the social media giant’s other problems, including various issues regarding how it manages the privacy of its users. Back in 2019, Facebook had faced a variety of lawsuits and investigations regarding data privacy. Now, these issues have become essentially forgotten amidst this coronavirus drama.
Shares of Facebook shot up 11% on Wednesday in response to the news. While the company’s stock had tumbled significantly since the coronavirus outbreak began, shares have seen recovered a fair bit in April. Overall, it seems that the social media giant is going to do pretty well during this pandemic.
Facebook Company Profile
Facebook is the world’s largest online social network, with more than 2 billion monthly active users. Users engage with each other in different ways, exchanging messages and sharing news events, photos, and videos. On the video side, the firm is in the process of building a library of premium content and monetizing it via ads or subscription revenue. Facebook refers to this as Facebook Watch. The firm’s ecosystem consists mainly of the Facebook app, Instagram, Messenger, WhatsApp, and many features surrounding these products. Users can access Facebook on mobile devices and desktop. Advertising revenue represents more than 90% of the firm’s total revenue, with 50% coming from the U.S. and Canada, and 25% from Europe. With gross margins above 80%, Facebook operates at a 40%-plus margin. – Warrior Trading News
