Facebook Q2 - Grows In A Pandemic

Facebook came out with its quarterly numbers yesterday after-market. They hammered expectations on both revenues and earnings, notwithstanding the fact that we are in the middle of a pandemic. The social media giant said user engagement increased, as measured by what they call family daily active people, which is the number of people who use one of their major apps every day.

Revenue for the quarter of $18.69 billion was up 11% year-on-year, leading to profits of $5.18 billion, which crushed the street's expectations. The company still makes 98% of all its revenue from advertising. Non-advertising business is made up of the virtual-reality operation Oculus, as well as Portal, a home video calling device which saw revenues surge by 40% year-on-year.

The pandemic has halted a lot of economic activity across the globe as people spend more time at home, meaning there's a big need to connect with friends via social media. Facebook is used monthly by 2.7 billion people, up from 2.6 billion in the first quarter. More than three billion people now use at least one of Facebook's family of apps. That's getting up towards half of the world's whole population.

I've written extensively here about the "Stop Hate For Profit" ad boycott, which arose because of concerns about how Facebook handles hate speech on its platforms. This boycott ends today, as it was planned to last for the month of July. Some larger advertisers said that they might continue to limit spending on Facebook's family of apps. Facebook mostly provides a platform for small businesses, who aren't slowing down their ad spending much as it is crucial for their businesses. COO Sheryl Sandberg said that they're engaging with civil-rights groups and working to combat hate speech "not because of pressure from advertisers, but because it is the right thing to do,".

The company also released new products such as a customisable shopping feature for small businesses, Instagram Reels, which is a TikTok clone, and Rooms which is a Zoom double.

Mark Zuckerberg's comments at yesterday's Congressional antitrust hearings were interesting. At one point he said "The most popular messaging service in the US is iMessage, the fastest-growing app is TikTok. The most popular app for video is YouTube. The fastest growing ads platform is Amazon. The largest ads platform is Google. And for every dollar spent on advertising in the US, less than 10 cents is spent with us." He proved with ease that Facebook is not a monopoly.

We know that the pandemic will leave scars and change behaviours, not only in our personal hygiene routines but also in how we interact socially. Social media companies will thrive as engagement stays constant. We like Facebook as an investment, because it has demonstrated the ability to pivot when it needs to do so.