Facebook Counting on Video and eCommerce Initiative

Facebook (Nasdaq: FB) recently reported its first quarter results that failed to impress the market. But as social interactions go virtual and ad markets begin to recover, the stock is beginning to gain lost ground.

Facebook’s Financials

Facebook’s Q1 revenues grew 18% over the year to $17.74 billion, ahead of the market’s estimates of $17.48 billion. Adjusted EPS was $1.71, missing the market’s forecast of $1.75.

The company claimed it faced significant reduction in advertising demand during the quarter due to the virus. But the usage metrics for the social media platform were impressive as people resorted to the platform to communicate with their friends and family. Its daily active user numbers for the core Facebook app grew 11% over the year to 1.73 billion and monthly active users grew 10% to 2.6 billion. The number of people active on any one of its family of products including WhatsApp and Instagram grew 11% to 2.99 billion people per month in the quarter. Daily active users on these applications grew 12% to 2.36 billion. Facebook realizes that some of these metrics will go down once the lockdown conditions are relaxed.

By segment, advertising revenues rose 17% to $17.44 billion and revenue from Other services grew 80% to $297 million.

Given the global economic conditions, Facebook will see reduced expenses within its travel, events, marketing, and personnel spend lines. However, it plans to continue to invest in product development and to recruit technical talent. Additionally, it has committed over $300 million to date in investments to help the community during the crisis. Given the uncertainties, Facebook did not provide any outlook for the quarter.

Facebook’s Focus Areas

Facebook is focusing on e-commerce and video segments to drive growth in the current pandemic. Last month, it announced a number of new product improvements on video presence. It is focusing on three key video areas – video calling, video rooms, and live video. Video calling is one of the most used type of video chat and between WhatsApp and Messenger, it recorded more than 700 million daily actives participating in these calls. Amid the crisis, it noted that these video calls are doubling in size, especially for WhatsApp users.

For video rooms, it announced a new product called Messenger Rooms that allows users to create a room for any active event. Users can share links of these events or even allow other users to discover the rooms through Facebook directly. It is also seeing how some users are using spontaneous video rooms instead of using them as planned events as part of their social activities.

Finally, Live video allows users to primarily live stream physical events. This form of video has become particularly important today when most live events are cancelled and have turned virtual. In fact, Live video is being used to stream the Pope’s weekly mass and even for DJs to host dance parties on Instagram. Facebook revealed that every day more than 800 million daily actives were engaging with live streams, across workout classes, concerts, and more.

Besides videos, Facebook is concentrating on improving its e-commerce offering, especially for small businesses. With global lockdowns, most brick and mortar stores have had to turn to digital stores in a hurry. Facebook is working to ensure that small businesses have impressive storefront experiences for their customers by enabling them to list inventory and complete entire transactions online. For instance, it recently announced plans to enter into a partnership with Jio platforms in India. Jio operates JioMart, which is its small business initiative that connects small shops across India with WhatsApp. Together, Facebook and Jio plan to bring e-commerce to this platform to deliver a better shopping and commerce experience in the country.

Among other e-commerce services, it is now allowing businesses to sell gift cards on both Facebook and Instagram so that customers can support cash flow issues for small businesses. It also simplified the process of creating fundraisers for local businesses. To address the inventory issues faced by small businesses, it launched a temporary service that simplifies how businesses share critical information like inventory updates, shipment details, or new ways to purchase items.

Its stock is trading at $211.26 with a market capitalization of $605 billion. It hit a 52-week high of $224.20 earlier this year. It hit a 52-week low of $137.10 in March this year when most stocks took a tumble.

Photo Credit: Marco Paköeningrat/Flickr.com