As Small Businesses Suffer, Facebook's Fortunes Hang In The Balance
Facebook Inc will reveal on Thursday whether lower ad prices lured enough marketers in the second quarter to overcome the downdraft from widespread pandemic-induced closures among the small businesses that drive most of its revenue. Wall Street analysts on average expect Facebook's quarterly revenue to rise 3 per cent to $17.4 billion, which would be its slowest growth ever, per Refinitiv data. Socialbakers, a digital marketing agency, said data from the 9,000 advertisers it tracks indicates small companies decreased quarterly spend on Facebook ads by 21 per cent year-on-year, while medium-sized and large companies cut back 30 per cent.
Data from another agency, Gupta Media, indicated the volume of ads displayed on Facebook, which rose in the early stages of pandemic-related lockdowns, may have then retreated to pre-pandemic levels later in the quarter, while prices were depressed throughout the period.
June volumes in particular appeared to drop in the United States, which along with Canada contributes about half of Facebook's revenue, as some businesses went silent on social media to express support for anti-racism protests.
"If they beat revenue expectations, it will be an incredible testament to the flexibility and durability of their ad ecosystem. But it will be a Herculean task," said Gogi Gupta, whose agency tracks more than 8 billion ad impressions across Facebook's platforms, including Instagram and Messenger.
Shares of the world's biggest social media company have soared 56 per cent since mid-March when much of the world went into lockdown, with investors wagering Facebook would fare better than competitors in an advertising collapse.
Facebook said it saw signs of stability for sales in April after a plunge in March. Marketers forced to slash spending steered remaining budgets toward easily produced digital ads, according to the Interactive Advertising Bureau.
Still, the pandemic has crushed small businesses, which by some estimates account for 75 per cent of Facebook's sales. Of the 30,000 small and medium-sized companies surveyed on Facebook's platform in May, 26 per cent said they closed this year.
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