Just at the beginning of the first wave of the pandemic, Politico declared that coronavirus crisis has shown Big Tech for what it is — a 21st century public utility, making sense to police Google, Facebook and Amazon in the same way as electricity and water companies.
The article form Mark Scott, the chief technology correspondent at Politico, also addresses the call for dismental on these tech giants:
First in Europe, and then in the U.S., some lawmakers called for these digital behemoths to be broken up, urging the need for greater competition in a world that has come to be dominated by a select few Silicon Valley brands.
But it’s this exact dominance — Google in search results, Facebook in social media, Amazon in online deliveries — that has made their collective response to COVID-19 so essential.
The coronavirus crises changed the playground for a lot of businesses. After the new lockdown measures were implemented more and more people spend extra time online. But was Facebook able to monetise this extra time?
On 28 April, Facebook reported its revenue for Q1 2020 at $17.74bn, a rise of over 17% year-over-year from $15.08bn in the same period a year ago. Meanwhile, earnings per share were $1.71, up from $0.85 a share in the first quarter of fiscal 2019. The following day Facebook’s share price rose 6%, a trend that has continued since.
Facebook said at the time that a record number of people were using its services, primarily its Messenger and WhatsApp chat apps as well as Instagram. Facebook reported that total messaging has increased by 50 percent and video calling has doubled in some markets.
“We don’t monetise many of the services where we’re seeing increased engagement, and we’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19. We’re just trying to keep the lights on over here,” Facebook CEO Mark Zuckerberg told The New York Times in an interview.
Facebook knows its growth is temporary and it could make less money than expected next quarter.
Although Facebook surprised analyst expectations of $1.75 EPS on revenue of $17.41bn, the quarter was the slowest growth period the company had experienced since going public in 2012. It was also a poor quarter for share price performance, as the share price closed down 18.7% for the first quarter.
The prices of Facebook ads have declined 35 percent to 50 percent on average in recent weeks, said Alex Palmer, an analyst for Gupta Media, a digital marketing agency.
Last month, Facebook warned that it was already seeing signs of an early pullback. The slowdown in growth is due to advertising budgets being cut. In its earnings release, Facebook withdrew guidance for the second quarter and full-year “due to the increasing uncertainty in our business outlook”, according to a statement.
Google’s and Facebook’s advertising businesses, which have tripled in combined size over the last five years, may be headed for a rare stumble.
Common advertisements like travel and entertainment ads have all disappeared from Google search. Wall Street analysts are estimating that annual revenues will decline for the first time in the history of the two companies.
John Blackledge, an analyst for the investment firm Cowen, trimmed his 2020 revenue forecast for Google and Facebook by nearly 20 percent. He now predicts a decline in annual revenue for both.
Despite the uncertainty and the expected economic recession, Facebook’s quarterly report revealed the company’s focus on expansion.
In spite of Covid-19, Facebook is continuing to invest in expansion,” said Martin Garner, COO at CCS Insight. This approach indicates that the company will be less profitable for the rest of the year, but it sees this as an investment.