The ads are gone, why is social media alone?

The following article comes from Gromhui Financial Hotspots Author Stephen Old Dream

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The parent company of Google, one of FAANG's parent companies, reported first-quarter results after the U.S. stock market closed Tuesday. Alphabet reported revenue of $41.159 billion, up 13 percent from a year earlier, and net profit of $6.8 billion, up 3 percent from a year earlier. Among them, Google achieved revenue of RMB40,975 million, up 13.72% YoY, operating profit of US$9.27 billion, flat YoY, and operating margin of 19%, up 1 percentage point from 18% YoY.

(Photo: Company Quarterly)

At first glance, Google's first-quarter performance wasn't bad, but it was an undercurrent.

CFO Ruth Porat revealed that Google's business remained strong in the first two months of the year, but advertising revenue fell sharply in March, mainly due to a decline in brand advertising.

In the first quarter of this year, Google's advertising revenue was $33.8 billion, up 10.4 percent from a year earlier. That was the slowest pace since 2017.

(Photo: CNBC)

Google did not give its second-quarter earnings guidance because of the outbreak, but said it would have a "difficult year."

Google's shares jumped 7.61 percent after the company reported quarterly results. Yesterday's session closed up 8.47 per cent at $1,341.48, or $917.534 billion.

Judging by google's revealed footage, the advertising industry is approaching its winter, with the exception of Google, which relies heavily on social media such as Facebook, Twitter and Snap for advertising revenue, or will not be spared.

The social media advertising business is collectively cold

This morning, Facebook, another FANNG company, also reported quarterly results.

Facebook reported revenue of $17.737 billion in the first quarter, up 18 percent from a year earlier, and net profit of $4,902 million, up 102 percent from a year earlier. The company's reporting period revenue beat analysts' expectations, sending its shares up 10.46 percent after the session.

Over the same period, Facebook recorded $174.4 in ad revenue, up 17 percent from a year earlier and accounting for 98.3 percent of total revenue.

However, the growth rate of advertising revenue from previous quarters still showed a certain decline. Facebook's ad revenue grew 26.43 percent year-on-year in the first quarter of last year, followed by growth of more than 25 percent in each of the three quarters.

(Photo: Tonghuashun iFinD)

The company disclosed that in the last three weeks of the first quarter, platform advertising demand and advertising pricing have fallen sharply. In view of the increased economic uncertainty, the Company will not provide guidance on revenue for the second quarter and full year.

However, Facebook said demand for advertising began to stabilize in the first three months of April, about the same as a year earlier, after a sharp drop in advertising revenue in March. The platform said the narrowing of advertising growth in April reflected the impact of quarantine measures on most of the countries it covered.

At the end of the first quarter, Facebook's DAU was 1.73 billion, up 11% year-on-year, MAU was 2.6 billion, up 10% year-on-year, and home monthly active users (MAP) were 2.99 billion, up 11% year-on-year.

At the end of the fourth quarter of last year, the platform MAU was 2.5 billion, up 50 million (2%) month-on-month ;D AU was 1.66 billion, up 40 million (2.4%) month-on-month.

In the fourth quarter of last year, the platform's DAU and MAU data growth increased significantly month-on-month.

(Photo: Techcrunch.com)

But the surge in the number of users corresponds to the "slowing" of ad revenue growth, suggesting that the main factor determining advertisers' willingness to deliver is not platform traffic, but their own revenue and economic outlook.

Although Facebook has said that the platform's advertising demand in April has stabilised from a decline in March to a level with previous years, there is still plenty of talk of a market shorting Facebook.

MARK Mahaney, an analyst at RBC, has previously said he assumes the second quarter will be Facebook's worst-hit quarter, with advertising revenue down 21 per cent year-on-year, not counting the impact of currency movements. Growth is expected to be 11% and 5% in the third and fourth quarters, after which the company's advertising business will gradually return to growth.

In addition to Facebook, there are three Chinese-owned microblogs, Renren, Stranger Things, and Snap, Match Group, Twitter and Pinterest.

As of the latest, Facebook and Snap have reported first-quarter results in the social media sector.

Snap recorded total revenue of $561 million in the first quarter, up 44 percent from a year earlier and well above analysts' average estimate of $431 million. In the first quarter, the platform DAU was 229 million, up 20% from 190 million in the same period last year and 11 million from 218 million DAU in the fourth quarter of last year, well above analysts' expectations of a net increase of 7 million.

Snap previously disclosed that its ads reach 75 percent of millennials and Gen Z high-paying potential people aged 13-34 in the U.S. As a result, the platform DAU's continued stability and even expected growth could help advertisers increase their budget spending, partially offsetting the impact of the new crown outbreak.

Snap's strong user stickiness was reflected in revenue metrics, which showed higher-than-expected revenue growth in the first quarter.

However, due to the outbreak of neo-crown pneumonia and macro-environmental uncertainty, the Company has not yet made a forecast for second quarter revenue or adjusted EBITDA.

Photo Pinterest, the social networking app, forecast first-quarter revenue of $269 million to $272 million, above market expectations of $267 million, and MAU of $365 million to $367 million, also higher than market expectations of $353 million. On the liquidity side, the company expects cash on hand to be $1.7bn at the end of last month, compared with $500m for available credit.

The company also highlighted that revenue in the first half of last month was in line with expectations and that advertising revenue remained stable.

But the company also said that its advertising revenue began to show a "sharp deceleration" in mid-March, and also withdrew its guidance for full-year revenue and adjusted EBITDA, also because it could not predict the impact of the new crown pneumonia on the company's operating results for the rest of the year.

Late last month, Twitter's CFO Ned Segal said on its first-quarter earnings outlook that the new crown outbreak had spread globally and that the impact on advertising revenue had increased significantly over the past few weeks. Despite the platform's record number of new active users, Twitter expects its first quarter to record an operating loss, on the grounds that advertisers are running away from the platform in the opposite direction to users.

Judging by all the mainstream social media revelations, the decline in advertising revenue below the calibre occurred in mid-to-late March.

For advertisers, the negative effects of the outbreak isolation come from the mountains, and when they go, they affect more than just this time in late March.

Facebook, Twitter, Pinterest and even Snap, whose users are extremely sticky, may not be able to escape the slump that began in the advertising industry.

The economy is down, will you still advertise?

Neil Patel is a well-known SEO expert in the industry. There is an article on his personal blog about the impact of the outbreak on advertisers, which contains some more relevant data:

Natural traffic (i.e. traffic obtained through free search) will decline in most sectors, including tourism, advertising and construction, with only a small number of sectors such as energy, finance, food and media seeing an increase in natural traffic.

(Photo: Neilpatel.com)

In terms of conversion rates, only the food, healthcare, media and pharmaceutical sectors are expected to sustain growth, while the rest are expected to show negative growth.

(Photo: Neilpatel.com)

If the above industry statistics are still relatively abstract, you can look at the brand's advertising intention statistics. A survey of 237 brands conducted at the end of March by Marketing Resources Hub, an integrated marketing resources website, showed that luxury and service companies were more uncertain about advertising, while traditional media, such as magazines, were already cutting back on future publishing plans.

Of the 237 brands surveyed, 69 per cent said they expected to reduce advertising spending this year, while 65 per cent said they had seen signs of a decline in revenue. As for the remaining 35 per cent of brands, Influencer Marketing Hub says it may be a pillar industry or the impact of the outbreak has not yet reached its peak.

(Photo: Neilpatel.com)

Seventy-four percent of the brands surveyed said they had fewer posts on their social accounts. In addition, brand advertisers said their ad spending returns were higher than in previous years as the cost per thousand views (Cost Per 1000 Impressions, CPMs) and cost-per-click (CPC) fell.

Marketing World and Econsutancy surveyed 887 UK brand marketers, with 39 per cent reporting a decline in demand for their products, 61 per cent expecting demand to continue to decline in the next two quarters and 36 per cent expecting demand to fall by more than 20 per cent.

Statista's website includes a set of surveys of U.S. marketing agencies and advertising agencies. The results showed that 89% of respondents said they would change their marketing methods because of the new crown outbreak. Thirty-four percent of respondents said they would cancel their original marketing plans, while 45 percent said they would adjust their media types or adjust their advertising budgets.

(Photo: Statista.com)

In terms of multi-statistical calibre, cutting advertising budgets has become a common choice for advertisers in most industries, even as the isolation of the epidemic has led to pressure on the company's fundamentals and declining user demand.

The economy is down, will you still advertise?

Most advertisers around the world give NO the answer.

Social media rebounded en masse at the end of March

Judging by stock price movements, the U.S. social media sector index bottomed out on March 18 and then began to recover. By yesterday's close, Facebook, Snap and Twitter were up 30 per cent, 100 per cent and 27 per cent respectively. Even since February, the companies' share prices have fallen just 3.8 per cent, 2.99 per cent and 4.28 per cent.

In terms of stock price movements, the advertising industry's winter is more of a transit tropical hurricane for these social media platforms.

(Photo: Tonghuashun iFinD)

Last night, the US business sector released first-quarter GDP figures showing a 4.8 per cent fall in first-quarter GDP, below market expectations of -4 per cent, the biggest quarterly fall since the subprime crisis (Q4 fell 8.4 per cent in 2008).

Spencer Hill, an economist at Goldman Sachs, says it's hard to accurately count the flow of goods and services because about 95 percent of the nation's GDP is subject to segregation. Real GDP is likely to be worse in the first quarter.

Since the outbreak in the United States began in the first week of March, last night's GDP reflected only part of the impact of the early stages of the outbreak. The figures available after that include 26m job losses in the past month, a record plunge in consumer and business activity figures, and a bigger fall in GDP in the second quarter.

The advertising industry is known as the GDP barometer. Combined with online public surveys of industry/brand advertisers, their willingness to deliver appears to have declined during the year.

Of course, specifically for a social media platform, its advertisers' current willingness to deliver will be different from the overall survey results. But combined with macroeconomic factors, the market's current stock market reflects whether it is too optimistic about the short-term rebound in social media performance?

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The ads are gone, why is social media alone?

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