Facebook reports 10 percent ad growth and says it saw a similar spike during boycott
Facebook weathered coronavirus and now says it’s hanging strong during the July brand boycott, after the company reported earnings on Thursday. In a defiant talk with investors, Facebook CEO Mark Zuckerberg said that the number of advertisers is growing, now at more than 9 million, despite hundreds of major brands freezing their activity as part of the Stop Hate for Profit protest movement.
“Some also seem to wrongly assume that our business is dependent on a few large advertisers,” Zuckerberg said during Facebook’s earnings call with Wall Street analysts. “Now, while we value every single one of the businesses that use our platforms, the biggest part of our business is serving small businesses. Our advertising is one of the most effective tools that small businesses have to find customers, to grow their businesses and create jobs.”
Facebook previously said there are more than 8 million advertisers across Facebook, Instagram, WhatsApp and Messenger. The number was updated to more than 9 million on Thursday. Facebook said that more users and advertisers were flocking to its platforms during coronavirus, as the outside economy was shut down and people relied on the internet to operate.
In July, hundreds of brands, including Unilever, Starbucks, Verizon, Ford and Adidas joined the Stop Hate for Profit campaign that saw them draw down spending on the social network to pressure the company to improve its hate speech and disinformation policies.
Zuckerberg defended his company against the criticisms. “We’ve built services that billions of people find useful,” Zuckerberg said. “I’m proud that we’ve given a platform for people to make their voices heard and given small businesses access to tools that only the largest players used to have.”
Facebook said it generated $18.3 billion in ad revenue in the second quarter, an increase of 10 percent year over year. That was lower growth than it saw in the first quarter, when ad revenue rose 17 percent, but it was still a gain during a time when the economy was spiraling from the effects of coronavirus. Twitter, for instance, made less ad money in the second quarter compared to the same period a year ago, which it reported last week.
Facebook said that there were 3.14 billion people on its family of apps monthly, including Facebook, Instagram, WhatsApp and Messenger, in the second quarter, which was up from 2.99 billion in the first quarter.
Zuckerberg has had a tough month with the Stop Hate for Profit boycott. Facebook executives met with the civil rights groups behind the boycott at the start of July to negotiate new policies that would change how the social network monitors hate speech. This week, Zuckerberg appeared in Congressional hearings alongside Amazon CEO Jeff Bezos, Apple CEO Tim Cook and Google CEO Sundar Pichai. Lawmakers questioned the tech leaders about the powers of their platforms, which are under scrutiny for anti-competitive practices.
It was clear that Facebook executives have been a little frustrated by the attacks on the service. Sheryl Sandberg, Facebook chief operating officer, said the company has some of the most sophisticated controls in the industry to root out bad actors and hateful content.
“I think oftentimes, when companies are boycotted, it is because they don’t agree with what the boycotters want and that’s not true at all here,” Sandberg said. “We completely agree that we don’t want hate on our platforms, and we stand firmly against it. You know, we don’t benefit from hate speech, we never have. Users don’t want to see it, advertisers don’t want to be associated with it.”
Zuckerberg mounted a similar defense, saying, “some seem to wrongly assume that most of the content on our services is about politics, news, misinformation or hate, and let me be clear it’s not.”
Facebook said that its growth rate in the first three weeks of July, which covers the protest period, was similar to its second-quarter growth. “In the first three weeks of July, our year-over-year ad revenue growth rate was approximately in-line with our second quarter 2020 year-over-year ad revenue growth rate of 10 percent,” Facebook said. “We expect our full-quarter year-over-year ad revenue growth rate for the third quarter of 2020 will be roughly similar to this July performance.”
Facebook acknowledged the “unprecedented economic uncertainty” presented by COVID-19, which was responsible for the slowdown in advertising growth, so far.
Facebook also said that for the current quarter the boycott was a “contributing factor” in its outlook. The company was also being challenged by the fact that fewer people could use its products as the economy opens up and consumers leave the house. There also are challenges coming from new privacy rules, like the California Consumer Privacy Act, which could limit the effectiveness of ads and targeting, reducing the value of ads.
Zuckerberg said that the calls for strict privacy measure would harm the small businesses who are using sites like Facebook to grow. “I am often troubled by the calls to go after internet advertising, especially during a time of such economic turmoil like we face today with COVID,” Zuckerberg said. “It’s true that making it more difficult to target ads would affect the revenue of companies like Facebook, but the much bigger cost of such a move would be to reduce the effectiveness of the ads and opportunities for small businesses.”
Facebook’s share price was up in after-hours trading, however, more than 6 percent, since revenue beat analyst forecasts.