5 MAY 2020
SPECIAL CONTENT

HOW WAS THE ADVERTISING REVENUE OF THE GLOBAL TOP DIGITAL COMPANIES?

While some giants saw an increase in revenue, such as Facebook, whose profit increased by 18%, and Alphabet's by 13%, other platforms such as Amazon experienced a drop in income from USD 3.6 million to USD 2.5 million and Twitter's stock fell by 7.8% by Thursday's closing despite its strong earnings during its first quarter in 2020.

While some companies like Facebook, Amazon, and Alphabet show signs of gains and stability during the Covid-19 pandemic and predict the quarter that follows to be strong, other platforms, such as Twitter, have failed to show signs of recovery in its earnings report. Amazon’s sales hit USD 75.5 billion, but its income dropped USD 1 billion from a year ago. Its share price dropped 5% immediately after trading closed on Thursday, and the company reported a mixed performance for the first quarter of 2020. Amazon’s advertising services continues to be the company’s strongest performer and is growing rapidly.

Net sales came in at a 27% increase from the first quarter of 2019. USD 75.5 billion during the quarter. Net income was USD 2.5 billion, compared with USD 3.6 billion during the same period last year. This miss, plus the increased costs associated with the ongoing Covid-19 pandemic, forecast to hit USD 4 billion in Q2, leading to Amazon’s stock price dropping in after-hours trading. Amazon noted that quarterly revenues were up 44% coming in at USD 3.9 billion during the period. Its performance outstripped the growth of the company’s more established business segments such as online sales at 24%, subscription services at 28%, and Amazon Web Services at 33%. “Under normal circumstances, in this coming Q2, we’d expect to make some USD 4 billion or more in operating profit," Founder and CEO Jeff Bezos said. "But these aren’t normal circumstances. Instead, we expect to spend the entirety of that USD 4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe.”

Facebook reported rising revenue and profit during the first three months of the year but experienced a significant reduction in advertising in the last three weeks of March. The company admitted that its business would be affected by “issues beyond our control” and hasn’t released any forecasts about future financial results. Mark Zuckerberg, Facebook’s founder and chief executive, has said the use of the company’s video and voice calling services doubled in the past six weeks and more than three billion people now use one of the company’s apps every month. For the first quarter, Facebook said its revenue rose 18%  to USD 17.74 billion from a year earlier, while profit more than doubled to USD 4.9 billion, far surpassing Wall Street estimates. A year ago, Facebook’s profits were hurt when it took a USD 3 billion charge to pay a privacy settlement with the Federal Trade Commission. “This is not going to be business as usual, and the marketing industry is certainly going to see a real impact,” Sheryl Sandberg, Facebook’s chief operating officer, said in a television interview last month. “I don’t think anyone knows how big. So we’re going to watch and look.”

The chief executive of Google’s parent company, Alphabet’s said its profit has increased despite the company experiencing a “significant and sudden slowdown” in advertising in March. Revenue rose 13%to USD 42.1 billion from a year earlier, and net income went up 3 percent to USD 6.8 billion. The company predicts a “strong” next quarter. Alphabet plans to adjust investments in areas such as data centers, machine learning, and curbing costs for travel and marketing, as well as the reduction of its investments in office buildings, halting most of its new construction and acquiring new commercial real estate at a slower pace. Ruth Porat, Alphabet’s chief financial officer, warned that “the second quarter will be a difficult one for our advertising business” and said the company no longer expected that its workforce would grow more than 20 percent in 2020, as it had predicted in January.

Twitter reported strong earnings for its first quarter in 2020 despite suffering a negative impact from the pandemic. The stock increased by 12% during premarket trading on news of the report but fell more than 6% during the earnings call. The stock fell 7.8% by Thursday’s closing. After an initial spike, the stock turned negative as executives failed to reassure analysts on the earnings call that it had seen signs of recovery. CFO Ned Segal pointed to weakened advertising spending at the end of March as a reflection of what Twitter has been experiencing this month. The company’s total advertising revenue was USD 682 million, more than USD 3 million than last year. Segal said Twitter was negatively impacted by canceled and postponed events and said that toward the end of March, it saw a greater decline in ad spending in the U.S. compared to Asia. He added that as the economy in Asia began to reopen, it’s seen a lessened impact in the region in terms of ad spending.

Despite the cancellation of live sports events and product launch delays, Twitter has benefited from virtual experiences during the pandemic, Segal told CNBC’s Andrew Ross Sorkin. Earlier this month,  analysts at Bernstein said that the involvement of Elliott and Silver Lake will help catalyze innovation at Twitter, especially in ad products. The deal included a USD 1 billion investment in the company by Silver Lake. In the near future, according to analysts, Twitter, and all other digital ad platforms, will likely suffer from lower ad revenue even as engagement climbs since many brands are wary of advertising on coronavirus-related content.

This is not going to be business as usual, and the marketing industry is certainly going to see a real impact. I don’t think anyone knows how big. So we’re going to watch and look.” Sheryl Sandberg Facebook’s Chief Operating Officer