Market Insight

Facebook Q1 2020 financials: advertising revenue grew 17%, daily active users grew 11%

April 30, 2020  | Subscribers Only

Kia Ling Teoh Kia Ling Teoh Senior Research Analyst, Advertising and Television Media

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Facebook reported Q1 2020 results on 29 April 2020. Compared to the same period last year:

  • Total revenue, consisting of advertising and other, grew 18% to $17.7 billion from $15.1 billion
  • Advertising revenue increased 17% to $17.4 billion from $14.9 billion
  • Other revenue was up 80% to $297 million from $165 million
  • Daily active users (DAU) grew 11% to 1.734 billion from 1.562 billion, and monthly active users (MAU) grew 10% to 2.603 billion from 2.375 billion
  • Average revenue per user (ARPU) went up by 8% to $6.95 from $6.42
  • Family Daily Active People (DAP) grew 12% to 2.36 billion from 2.10 billion, and monthly active people (MAP) grew 11% to 2.99 billion from 2.69 billion. The Family metrics measure Facebook’s total user base across its core Facebook app, Instagram, Messenger and WhatsApp.
  • Family ARPU grew 7% to $6.03 from $5.66
 

Our analysis

Impact of COVID-19

Even though DAU growth increased during the pandemic, the stable 17% growth in advertising revenue is by far the lowest growth the company had experienced since 2011. During the last three weeks of the quarter, decrease in demand for advertising started to show and eventually led to price drops, according to Facebook. The growth of global ARPU halved to 8% in comparison to 16% in the same period a year ago.

Other revenue, which consists of revenue generated from the sale of consumer hardware devices and fees from payment infrastructure, grew 80% mainly driven by the sales of the company’s VR product Oculus. Gaming is one of the sectors that are likely to benefit from the pandemic as people stay home and seek entertainment.

Family ARPU of $6.03, lower than Facebook’s ARPU of $6.95, is due to some of the apps such as Messenger and Whatsapp were not yet being fully monetized.

Growth slowed in all regions in Q1 2020, in line with the company’s overall growth rate. Asia Pacific remained the fastest-growing region in terms of advertising revenue and monthly active users. Advertising revenue grew 21% year-on-year to $3.2 billion, faster than the company’s global advertising revenue growth of 17%. The region is now responsible for 21% of Facebook’s monthly active users but only 19% of the advertising revenue. ARPU in this region was $3.06 in Q1 2020, dwarfed by $34.18 in US and Canada. We believe this is due to the lower ad prices the region offers and the difficulty to monetize video ad inventory, which carries a higher CPM, in emerging APAC countries such as Myanmar and Nepal where internet infrastructure is less reliable. 

Advertising is now 98% of Facebook’s revenues and the heavy reliance on advertising has made companies such as Facebook and Google more vulnerable to economic volatility. However, they have the advantage of being the dominant players in the market and will continue to retain market share during the crisis thanks to increased user engagement with their platforms and services. Additionally, some ad verticals, such as gaming and e-commerce are actually growing during the pandemic and this will boost established platforms offering such advertising. Facebook’s “shoppable” ad formats and Facebook Audience Network offering put it in a good position to capitalize on this growth.

Outlook

Omdia expects Facebook’s Q2 2020 advertising sales to be hit moderately by the impact of COVID-19, depending on how long the lockdown lasts and the speed of the economic recovery. On a regional basis, Asia Pacific will continue to perform well given the quick recovery in countries like South Korea and Taiwan and relatively less severe impact of COVID-19 compared to the current situations in the US and Western Europe.

Meanwhile, the company recently invested $5.7 billion in Indian digital platform Jio. The investment is a strategic move to tap into India, its largest user base in Asia Pacific and also to invest in a region that is under-monetized.

Organization
Facebook
Research by Market
Media & Advertising
Category
Advertising
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