Whatās Going On Here?Facebook reported higher-than-expected first-quarter revenue late on Wednesday, and investors didnāt wait around to slide into the social media giantās DMs. What Does This Mean?With the world forced to stay home toward the end of last quarter, there wasnāt much else to do but scroll through Facebook and watch Instagram Liveās quarantine concerts. That helped the tech giant clock 10% more monthly active users than the same time last year. Still, while it had predicted its revenue growth rate would slow this quarter, the company ā like Google before it ā hadnāt factored in just how much coronavirus-shy advertisers would curtail their March spending. That revelation landed with a thud: Facebookās ad revenue so far in April has essentially been the same as a year ago (tweet this). Whatās more, it seems to have lost its knack for keeping costs in check despite all the expense-trimming itās been doing: it reported a quarterly profit that slightly missed estimates, and opted not to give investors a prediction about how its year will pan out. Why Should I Care?The bigger picture: It all ads up.
Facebookās bigger advertisers do still seem to be splashing some cash on the platform, even if their future spending is uncertain. But the social butterfly serves eight million ad partners and 120 million businesses, and only 20% of its revenue comes from the top 100 of those. Itās Facebookās smaller customers, then, that might be a cause for concern: small- and medium-sized businesses are among the worst hit by the pandemic, and while the economy will eventually recover, thereās no guarantee those firms will too.
For markets: What a relief rally.
Most investors were braced for harrowing updates for companies reliant on advertising, like Facebook, Snapchat-owner Snap, and Google-parent Alphabet. Perhaps the reality wasnāt as bad as they thought, because Snap, Alphabet, and now Facebookās shares all shot up after their respective updates. No pressure, then: Twitterās facing similar challenges, and reports its earnings late on Thursday. | 