Facebook used the pandemic to build non-ad businesses, while ad money kept pouring in

This article is part of a series that tracks the effects of the COVID-19 pandemic on major companies and sectors. To see other articles and previous versions, click here. Facebook Inc. has been shedding a near-servile reliance on advertising during the COVID-19 pandemic, while continuing to add more advertisers and continuing to boost its core business. Messaging is king on Facebook FB, + 0.73% and the subsidiary Instagram despite a largely ceremonial pandemic and advertising boycott in July 2020 because, quite simply, the platform is very effective in delivering information, accurate or not. Consider the misinformation about the coronavirus and vaccines, which has been gushing out like a fire hose for more than a year, as Facebook makes statements about its elimination.

It doesn’t matter if the information is good or bad, Facebook continues to attract users to its platforms to see it, as well as its real customers: the advertisers. The proof is in the numbers: at the end of 2019, before the pandemic took hold of the US economy, Facebook reported that 7 million advertisers and 140 million businesses were using its services; As of January 27, 2021, following its fiscal fourth quarter earnings report, it was 10 million advertisers and 200 million businesses. That has led to an increase in profits and income during the pandemic, as well as a rise in share prices. So far this year, Facebook shares are outperforming high-tech siblings Apple Inc. AAPL and Amazon.com Inc. AMZN, which are up 1.5% and 3% so far this year. year to Friday close, respectively. Credit Facebook’s concerted effort to go beyond its core social networks to become the hub of social media, gaming, messaging, and AR / VR – all good places to be as COVID-19 accelerated growth. in all four markets. Non-ad revenue was a particular focus for Zuckerberg during the company’s earnings call in late January. While advertising accounted for 98% of Facebook’s quarterly revenue, “other revenue,” such as Oculus VR headsets and Portal video chat devices, increased 156% to $ 885 million. The company singled out more than 60 Oculus developers and strongly hinted that it intends to bring mixed reality products to the workplace. Underscoring the intersection of social media and commerce, Facebook CEO Mark Zuckerberg said in late January that more than 175 million people message a WhatsApp business account every day and that “we are creating new features to further facilitate transactions with businesses in the app. “New products and services sprouted from Facebook like a broken dam in the first year of the pandemic. Facebook Shops made its debut in May. The service, which allows brands to list its product catalogs directly in the most popular Facebook applications and sell products directly on Facebook and Instagram, it now has more than 1 million active stores in which more than 250 million people interact monthly, says Zuckerberg. Bernstein’s analyst, Mark Shmulik, believes that Facebook Shops will be a great contributor starting this year. “We believe that Facebook Shops is ready to start contributing d and significantly to 3Q21 revenues, “he wrote in a March 19 note that estimated quarterly sales of around $ 300 million. (Morgan Stanley analyst Brian Nowak put the annual gross at about $ 1.9 billion in a March 19 note.) Instagram Reels, a TikTok-like feature for recording and editing 15-30 second videos with effects, was announced in August. In October, Quest 2, Facebook’s virtual reality headset for games and entertainment, launched for the holidays for around $ 300. “We’re also laying the groundwork for AR glasses, which will be the holy grail of providing a sense of presence without taking it away from the physical world, ”Zuckerberg said during a conference call with analysts. “We are partnering with Luxottica, the maker of Ray-Ban and Oakley, to build our first smart glasses to be released at some point. [in 2021]. “On March 23, Facebook said it is working on a version of its Instagram app for children under the age of 13, who are currently not allowed to use the app due to federal privacy rules. (An international coalition of 35 groups of kids and consumers on April 15 urged Instagram to dig deeper into their plans.) On April 19, Facebook released new audio tools, including a possible rival to the invitation-only audio chat app Clubhouse. Quest 2 en a particular promise and possibilities for Zuckerberg, who said at the end of January: “This is one of the areas where I am most excited about our progress going into 2021.” If you look at the history of computing, every 15 years or so a major new platform emerges that integrates technology more naturally and ubiquitously into our lives, starting with mainframes, then PC, then browser-based computing, then mobile, “Zuckerb erg said in a conference call with analysts. “I think the next logical step here is an immersive computing platform that just provides this magical sense of presence – that you are really there with someone else or somewhere else.” How much is it like this? “The big milestone that I’m focused on here is that we want to reach 10 million active units in our virtual reality systems because we believe that at that point, that will be when it will become (in three to five years),” Zuckerberg said in October . 2020, in another call with analysts. Here’s another tantalizing figure: Adobe Digital Index 2022 projects will be the first $ 1 trillion year in e-commerce. “Once the pandemic happened, we were the first to adopt employees working remotely and reassess the priority needs of people with video capabilities, live paid events and a big push in e-commerce to make up for the drops. on travel ads, “a Facebook spokesperson The fear of Cambridge Analytica’s upcoming Facebook ad business, as well as its diversification strategy, is fraught with some hurdles. The most important could be an update to Apple’s operating system that will allow users to more easily block Facebook and other advertisers from tracking their activity on other applications and Internet sites, which has led to an open battle between the titans. of technology. The company’s CFO David Wehner warned in January that Facebook will face “major headwinds in ad targeting in 2021. This includes the impact of platform changes, in particular [Apple’s] iOS 14, as well as the evolving regulatory landscape. “” We increasingly see Apple as one of our biggest competitors, “Zuckerberg said in a conference call with analysts following earnings news in January. Read more: Facebook beats expectations but warns of ‘cross-currents’ in 2021 Another emerging threat is Amazon.com Inc. AMZN, + 0.38%. Its share of the US digital advertising market increased to 10.3% last year from 7, 8% in 2019 and could reach 12.8% in 2023, according to the research firm eMarketer. Google and Facebook are numbers 1-2 in the market, with 28.9% and 25.2%, respectively, in 2020, according to the report. The biggest and most persistent issue could be the problem of misinformation, which continues to haunt the Facebook brand. Zuckerberg, Alphabet Inc. GOOG, -0.76% GOOGL, -0.79% CEO Sundar Pichai and Twitter Inc. TWTR, -0.32% CEO Jack Dorsey were subjected to withering questions from a subcommittee of disinformation of the House on March 25. Wringing your hands leads to legislation is the next logical step. Tech legal expert Jenny Lee said members from both sides of Congress demonstrated at Thursday’s hearing that they are “galvanized and ready to proceed with serious legislation.” Read more: CEOs of big tech criticized the role of social media in promoting disinformation and extremism On the European front, a German court in Düsseldorf asked the Court of Justice of the European Union to determine whether Facebook infringed the strict EU data protection rules, called the General Data Protection Regulation. Read more: The fate of Facebook’s business model may be in the hands of the supreme court of the European Union. Of course, all the safeguards of regulation, whether self-imposed or by legislation, could be sacrificed with another data error similar to Cambridge Analytica. And with its digital tentacles reaching out in more directions, there is that possibility, say tech experts. Facebook “doesn’t have the best track record in handling personal information and data,” KC Estenson, CEO of GoNoodle, a maker of online entertainment for children, told MarketWatch. Meanwhile, the roadblock remains with Apple’s impending privacy update to iOS 14, which will make it easier for iPhone and iPad users to prevent companies like Facebook from tracking their activity to target ads. The impasse highlights a broader industry debate on the handling of personal data. In August, Facebook warned that Apple’s update could lead to a more than 50% drop in the social media giant’s Audience Network advertising business, which accounts for less than 10% of total net revenue. Later, Facebook warned in January that privacy changes could start to affect Facebook’s business by the end of the first calendar quarter. However, in mid-March, Zuckerberg explained in a Clubhouse chat that the change could benefit Facebook if more companies decide to sell products directly through Facebook and Instagram.