Bored, isolated citizens are a win for Facebook | Technology

Bored, isolated citizens are a win for Facebook | Technology

The tension between the media and technology industries has long been characterized as a fight for users’ attention. The more of it they have, the greater the opportunity to sell new products and services.

The advertising technology giants Facebook Inc. and Google have turned that into a $200 billion-a-year business. Now that millions of people are stuck at home trying to isolate themselves from the coronavirus, there should be greater opportunity to secure their attention. Facebook’s particular vector for securing users’ attention is connecting them with others, and in the era of self-isolation digital connections have become a lifeline.

The hitch is that when brands hit a rough patch, advertising budgets are the first things they cut. Broadcasters are already feeling the impact: NBC parent Comcast Inc. has warned of the negative effects on its business, while Britain’s ITV Plc. abandoned its 2020 revenue outlook and dividend as advertisers cut spending. Twitter Inc. has also scrapped its earnings outlook for the first quarter.

So Facebook’s announcement on Tuesday that its business was being “adversely affected” because of a “weakening in our ads business” shouldn’t have come as a big surprise. Significantly, however, the Menlo Park, California-based company stopped short of altering its (admittedly rather vague) existing first-quarter guidance, which anticipates revenue growth that will “decelerate by low to mid-single digit percentage points” compared with the end of 2019.

For the Silicon Valley companies, the difficulties are relative. Sure, they might be enduring some bumps, but their problems aren’t as severe as those of the TV industry – the advertising market overall will still expand this year. Cowen & Co. analysts still expect the U.S. ads market to grow 7%, albeit down from an earlier estimate of 11%. If previous years are any guide, Facebook and Google will hoover up most of that growth.

Shutdowns also seem to be forming new habits that benefit the social media platforms. More time at home seems to mean more time in front of a screen. I’ve posted more on Instagram in the past week than in the previous two months. Facebook itself has revealed a significant jump in engagement: 50% more messaging in countries most affected by the virus; a doubling of voice and video calling on WhatsApp and Messenger; in Italy, people are spending 70% more time across Facebook’s products.

People seem to be setting aside the justifiable concerns about the firm’s data practices, which have tempered engagement in recent quarters. Efforts to ensure that accurate messaging from governments and health authorities secures prominent placement on its platforms may be securing Facebook some true good will.

If even a fraction of the new engagement trends are sustained beyond the crisis, then a few quarters of slower advertising growth won’t be a concern for Chief Executive Officer Mark Zuckerberg – it’s unlikely even that he’ll have to touch the firm’s $44 billion net cash position. He has managed consistently to increase average revenue per user because Facebook has significant power to increase the cost of ads, as does Google. The moment the advertising market returns – and it surely will, whether in three, nine or 12 months – he could well find himself with more active users.

More active users will mean more attention. And ultimately, that means more money.

Source link