Lockdowns across the world are driving people to the Facebook family of services, which saw a “record number of people” using them. 3 billion people are logging on its central app, Instagram, WhatsApp, and Messenger every month. This represents roughly 2/3rd of the world’s online population.  

Messaging volumes have increased by over 50% in places hit hardest by the pandemic, voice and video calling have doubled across Messenger and WhatsApp, WhatsApp and Messenger have over 700 million daily active users making calls. 800 million people are engaging with livestreams daily. To this end, Facebook has introduced Messenger Rooms and increased the people-limit on WhatsApp calls to 8. 

Aiming for increasing online commerce, Jio deal is part of it

Facebook is leveraging the surge in usage of its platforms to onboard small and medium businesses and build online commerce on its platforms for the masses. This is a long-term plan: expected to benefit in the future, while increasing usage and showing effectiveness during a crisis. The Jio deal, and the JioMart-WhatsApp integration, is a classic case-in-point. To summarise Zuckerberg’s comments:

Small and medium businesses are less likely to have an online presence, in the form of a website or application. Facebook or Instagram pages are free and take moments to create. Facebook can increase usage and value by integrating orders, payments, and communication — such as delivery using WhatsApp and Messenger. 

The strategy is straightforward: get people and small businesses onto the family platforms; help businesses talk to customers and increasingly do businesses using Facebook platforms; and eventually drive them to carry out transactions. The apps become more useful if businesses can display their products on WhatsApp: via Catalogs. Or a new ad format where ads are included within messages, “a lot of small businesses and different businesses are finding that their message threads with people perform better for driving sales than their websites or other presences”. To this end, more businesses are using live services, think gyms and dance studios — naturally leading them to Instagram and Facebook live. 

The Jio deal follows the same logic: In Zuckerberg’s own words, the Jio deal is “an opportunity to service small businesses and enable commerce in the long term”. Millions of small businesses and shops exist, which can be brought “onto a single network that you’ll be able to communicate with through WhatsApp and do payments online through WhatsApp”. WhatsApp will be used to build a better shopping experience — a UPI payments services (albeit long-awaited), a lending service, and integration with JioMart are certainly steps towards this. “There’s a lot more we can do here and I’m looking forward to making progress with the team at Jio,” Zuckerberg said, adding that there’s “tremendous demand” for WhatsApp Business currently. We’re seeing a lot of businesses that were primarily physical, now moving towards selling stuff online for the first time, and we’re seeing a lot of businesses that already had a digital presence now really transition to having their digital presence be their primary presence,” Zuckerberg said.  

Ad revenue falls and will fall further: but growth in gaming, e-commerce stable

Zuckerbeg acknowledged that the Facebook’s financial position and high margins is what has allowed it to “continue investing in building products” and invest in Jio, “even when the underlying economic conditions are challenging”. He realises how important it is to maintain high margins, he said. 

Why ad revenue is likely to fall: While surge in platform usage may reflect how people have gone online when separated from social circles, even Facebook knows it won’t bring in money, as it doesn’t monetise many of the services where usage has increased. Facebook avoided providing a forecast for next quarter, given the uncertainty of lockdown orders and economic recovery dependant on that. Ad revenue for Jan-Mar fell 15% over the last quarter (by $3.2 billion), even though downturn in advertising began only in second week of March. If lockdown orders continue worldwide, especially regions with high returns on ads, Facebook’s ad revenue will see a significant hit. US & Canada, for instance, rake in roughly half of the company’s ad revenues, and their ARPU is unmatched. 

Within advertising, gaming grew strongly, and technology and e-commerce remained relatively stable — all sectors expected to have natural growth if people are indoors. Ads are selling at lower prices due to overall reduction in demand, but advertisers in these sectors “tend to optimize for measurable objectives”. Travel and automobile sectors were hit the hardest. “We’re seeing people who are driving towards online conversion events do well because they’re able to – they’re able to kind of bid in the auction and get those users and get those results that they’re looking for. And people who are looking for offline or more top of funnel brand, there we’ve seen more pullback in spend,” CFO David Wehner said.  

  • Ad revenue was strongest in APAC at 21%, followed by US & Canada, Europe, and Rest of World at 16% each. 
  • Ad impressions increased 39% (driven by News Feed) and average price per ad decreased 16%, due to reduction in overall demand for ads. 

A small update on misinformation: As an aside, fact-checkers have marked 4,000 pieces of COVID-19 content as false, which has led to warning labels on 4,000 pieces of content. This works, Zuckerberg said, because there’s a 95% drop in people clicking on posts once they are marked with a warning.

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