Will Facebook’s massive usage increases (eventually) turn into revenue?

Facebook has reported a massive spike in usage across countries hit by the coronavirus, which is most countries at this point. Last week the company said, “The usage growth from COVID-19 is unprecedented across the industry, and we are experiencing new records in usage almost every day.”

Traffic without ad revenue. But it immediately qualified that statement. The increased usage wasn’t tied to a corresponding increase in ad revenue: “We don’t monetize many of the services where we’re seeing increased engagement, and we’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19.”

It’s the same story across the internet, with news publishers losing out from advertisers blocking coronavirus-related content from their ad buys, other social media sites (i.e., Twitter) and Google enjoying record traffic, but without additional ad revenue.

Prior to the outbreak, Facebook had continued to see revenue growth in the U.S. but it was suffering declining usage and engagement according to various surveys and analyst estimates. In particular, Edison Research said last year that Facebook had an estimated 15 million fewer users than in 2017. Many of the defections were from younger users who are now using other platforms, including Facebook-owned Instagram, Snapchat and TikTok.

Rewriting the narrative. However, the aftermath of the 2016 election and a drumbeat of negative news damaged Facebook’s reputation and credibility with audiences. Large majorities of Americans, according to an April 2019 survey agreed with statements: Facebook “wastes our time” (82%), “spreads unfair attacks and rumors” (61%) and “divides us” (57%).

Now with the crisis, as the New York Times writes, Facebook and big tech firms more broadly, have a chance to “change the narrative” around their companies and brands. The so-called “techlash,” like so much ad spending, has hit pause. And the big tech companies can potentially regain control of the conversation about their brands.

How Facebook (and Google) handle themselves from now until the end of the crisis will be determinative of whether they can accomplish this — using a mix of genuine empathy, targeted support and shrewd PR. This combination is perhaps exemplified by Facebook’s $100 million grants program for SMBs. (Google just one-upped the company with $800 million in direct and indirect aid to SMBs.)

Why we care. Just like Amazon is poised to win big in the aftermath of COVID-19, Facebook is positioned to benefit long term if usage and engagement persist after the crisis is over. The company’s central role in “The Great Hack” will be a dim memory, wiped clean by forgiveness during social distancing.

And when it’s all over, months from now, we’re likely to see record ad revenue driven by pent-up advertiser demand. That assumes, however, that the shelter-in-place audience continues with its renewed Facebook habit.

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Source: IAB