- Google and Facebook both report their first-quarter earnings in the coming week.
- The financial results will give us our best look yet at how the pandemic is affecting the advertising industry.
- Advertising spend is typically a proxy for the health of the broader economy.
- As the financial crisis has ballooned, signs point to a massive drop in ad spending.
- The two companies collectively dominated the US digital ad market.
Google and Facebook are about to give us a vital indication of the damage the pandemic is doing to the US economy.
Over the past few weeks, economies around the world have been thrown into turmoil as countries instituted lockdowns to combat the spread of the novel coronavirus. In the US, there has been an unprecedented spike of 26 million unemployment claims. Countless businesses have undergone layoffs, furloughed staff, or instituted paycuts.
In the coming week, Google and Facebook both report their first-quarter financial earnings, which will provide new insight into the pandemic’s impact: its effect on online advertising.
Advertising spend is a proxy for broad economic health: In a booming economy, companies and organisations spend more on advertising, but when things go bad, ad budgets are often the first thing to be cut.
And Google and Facebook collectively dominate the US online ad market. Collectively referred to as the “duopoly,” they gobbled up 60.9% of all digital ad spend in the US in 2019, eMarketer estimated.
All signs already point to COVID-19 having a brutal impact on the ad industry. Campaigns are being cancelled or retooled, and sales are plummeting. Many news outlets have announced sweeping layoffs or employee pay cuts, citing a cratering in ad revenue that many are dependent on, even as demand for news skyrockets.
And Facebook has said, without providing specific figures, that its finances are being hurt by the crisis even as it sees record usage. “We have received questions about revenue, so want to provide some context here too: Much of the increased traffic is happening on our messaging services, but we’ve also seen more people using our feed and stories products to get updates from their family and friends,” two company executives wrote in a blog post in late March. “At the same time, our business is being adversely affected like so many others around the world.”
Some normally lucrative advertising verticals, like travel and hospitality, will be particularly adversely affected.
Google announces its first-quarter earnings after markets close on Tuesday, April 28. Facebook announces its results after markets close on Wednesday, April 29. Business Insider will be covering both earnings reports live.
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