Facebook, Google could lose $44 billion in advertising revenue from coronavirus
During the COVID-19 pandemic, advertising spending fell below the cliff. Facebook and Google are expected to bear the brunt of the huge losses in digital advertising.
Analysts at Cowen and Co. estimate that the combined global advertising revenues of the two internet giants could evaporate by more than $44 billion by 2020. That said, Google and Facebook will continue to make a lot of money even if revenue falls by double digits.
By 2020, Google's total net income is now expected to be about $127.5 billion, down $28.6 billion (18 percent) from Cowen's previous estimate. Facebook's advertising revenue this year was $67.8 billion, down $15.7 billion (-19 percent) from Cowen's previous forecast.
The revised estimate came after Facebook executives revealed in a blog post on Tuesday that the company had "taken positive action in some countries to reduce the spread of COVID-19, and our advertising business has weakened." Facebook's overall usage increased during the pandemic, with messages in the worst-affected countries up more than 50 percent from the previous month, but "we didn't monetize many of the services that increased engagement," said Alex Schultz, vice president of analytics, and Jay Schultz, vice president of engineering. Parikh wrote.
In the face of the latest signs of a rapidly spreading coronavirus pandemic, the digital advertising market is in trouble, Facebook In a blog post, the social network "sees our advertising business taking aggressive steps to reduce distribution in some countries, thereby weakening the advertising business Covid-19." "
The news Tuesday from Facebook (FB) comes a day after Twitter (TWTR) sharply lowered its outlook for the quarter in the face of a weak advertising market.
Like Twitter, Facebook's use of some of its services has soared, and the company says it uses record amounts almost every day. However, "we cannot monetize many services with increased engagement." "
In some of the worst-hit countries, mail volumes increased by more than 50% month-on-month. Facebook says voice and video calls between Messenger and WhatsApp have doubled in the same market. Facebook said it was "temporarily reducing the bit rate of videos on Facebook and Instagram in some areas" to reduce potential network congestion.
In the virus-hit country of Italy, Facebook's use of its company's apps has soared by more than 70 per cent. Real-time views on Instagram and Facebook doubled in a week. In Italy, group calls are up more than 100 0% from the previous month.
Facebook said: "Most of the increased traffic is happening on our messaging service, but we are also seeing more and more people using our feeds and stories to get updates from family and friends." "
Facebook shares fell 1.6 percent in pre-market trading Wednesday, while futures for the Standard and Poor's 500 index fell 1 percent. The stock rose 8.7 percent to $160.98 on Tuesday.
In a March 25 report, a team of Cowen analysts led by John Blackledge wrote that Facebook's advertising business is expected to "rebound" by 2021, up 23 per cent year-on-year to $83bn.
While both Facebook and Google's profit margins will fall by double digits, their profits are expected to continue to grow by billions of dollars: Google will generate $54.3 billion in revenue (adjusted 43 percent) for the full year 2020, according to Cowen.
EBITDA and Facebook are forecast to attract $33.7 billion (49 percent of profit).
Regarding the decline in advertising spending caused by the coronavirus, "digital platforms are feeling the most pain because it is relatively easy to drive advertising spending relative lying relative lying to media such as television, which may suffer more than the first quarter). Greenfield said in a blog post Wednesday.
Other Internet companies that rely on advertising revenue are also expected to be hit by the COVID-19 pandemic. Cowen cut its full-year revenue forecast for Twitter by 18 percent (to $3.2 billion), while Snap's ad sales were forecast at $1.66 billion, 30 percent below Cowen's previous forecast.
Meanwhile, Analysts at Cowen said Amazon's advertising business was "usually less than other large digital platforms" than other large digital platforms because the company's advertising was mainly about product search.
For the U.S. advertising business as a whole, Cowen and Co. cut their 2020 revenue forecast by $44 billion to $212 billion for the full year - down 11 percent from a year earlier and 17 percent from the company's previous forecast of $256 billion. According to the report, the sectors that led to the decline in U.S. advertising spending in 2020 are tourism, retail and automotive.
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