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Facebook cites ad sales drop due to virus

Facebook has reported “a significant reduction in the demand for advertising” over the last three weeks of the first quarter of 2020, although the social media giant says that had stabilised in the first part of April.

Even so, the social giant reported a robust 18 per cent increase in Q1 revenue, to $US17.74 billion ($A27.11 billion), and net income of $US4.9 billion ($A7.5 billion) (or earnings per share of $US1.71).

The company said Facebook monthly active users increased by 10 per cent year over year, to 2.6 billion worldwide – a gain of about 100 million in the quarter.

However, it also said: “We expect that we will lose at least some of this increased engagement when various shelter-in-place restrictions are relaxed in the future.”

Facebook declined to provide revenue guidance for the second quarter or full-year 2020.

“Our business has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook,” the company said.

The ad pullback at the tail end of Q1 was “broad based,” with a particular decline in travel and auto categories, CFO Dave Wehner said in the earnings call.

Brand advertising spend also dropped, while Facebook saw “relative strength” in a few categories including gaming advertising, he added.

Shares of Facebook rose more than 10 per cent in after-hours trading (after closing up 6 per cent in regular trading), as investors evidently feared the COVID-19 damage was going to be worse.

“Our work has always been about helping you stay connected with the people you care about. With people relying on our services more than ever, we’re focused on keeping people safe, informed and connected,” Mark Zuckerberg, Facebook founder and CEO, said in a statement.

Facebook daily active users were 1.73 billion on average for March 2020, up 11 per cent year-over-year.

The company’s monthly active users across the family of services – Facebook, Instagram and WhatsApp – also grew 11 per cent, to 2.99 billion as of the end of March.

“This economic pullback has certainly reinforced for me the importance of maintaining high margins,” Zuckerberg said. Facebook’s operating margin in Q1 was 33 per cent, versus 42 per cent in the fourth quarter of 2019.

Zuckerberg also expressed his concern that the COVID-19 crisis “will last longer than people are currently anticipating” and that reopening public places too soon will exacerbate the societal and business effects of the pandemic.

Originally published as Facebook cites ad sales drop due to virus

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