Soaring Q1 revenues for Google and Facebook could spell good news for global news industry

Google owner Alphabet and Facebook both surpassed expectations with their revenues in the first three months of the year, despite taking a hit from the coronavirus crisis in March.

Google and Facebook are seen as bellwethers of the advertising sector. Therefore, if their turnover is in better shape than expected, this raises hopes that the global market – while badly damaged – is not in quite as bad a state as was previously thought.

However, a report released today by the Advertising Association and Warc forecasts that £4.2bn will be wiped off the UK market this year, reducing its total size to £21.1bn. The report predicts that advertising revenue will fall 20.5 per cent for national newspapers, 24.1 per cent from regionals, and 25.1 per cent for magazines in 2020.

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Some are concerned that Covid-19 will lead to  Google and Facebook grabbing a larger proportion of a smaller ad market.

Nicole Perrin, principal analyst at research firm eMarketer, told the New York Times earlier this month: “To the extent that people are still spending, it will be even more concentrated with Google and Facebook… They are likely going to end up in a stronger position after all this is over.”

However, media share prices appear to suggest that investors are taking the positives out of the tech giants’ results.

In the US, after Alphabet reported its first-quarter earnings on Tuesday evening, Fox Corporation’s share price rose four per cent on Wednesday, and then further in after-hours trading when Facebook released its figures. Gannett, publisher of USA Today and hundreds of regional titles across the US, rose seven per cent on Wednesday. The New York Times Company was up three per cent also, while News Corporation – which owns the Times and Sun newspapers in the UK – was up nine per cent.

In the UK, ITV’s share price rose four per cent on Wednesday. Reach, the national and regional publisher formerly known as Trinity Mirror, was also up four per cent. Daily Mail publisher DMGT, meanwhile, was up three per cent.

It is worth noting that much of the global stock market was boosted yesterday by optimism around an experimental Covid-19 drug being produced by pharmaceutical firm Gilead. But many of the media companies mentioned rose above average over the day as a whole.

Jason Kint, the chief executive of Digital Content Next, a trade body for digital news publishers, agreed that the figures from Alphabet and Facebook appear to be good news for publishers. But he added that, because they only run until the end of March, there remain many uncertainties about the greater impact of the virus on the advertising market.

“Yes, it appears that it was better than the market expected,” Kint told Press Gazette, adding that more will become apparent when Facebook’s shares begin trading again on Thursday as investors digest its earnings.

He added: “People are just looking for any sort of reading of the tea leaves that they can get. It’s very difficult… it’s a very cloudy picture still.”

Alphabet and Facebook first quarter 2020 results

Alphabet reported total revenues of $41.2bn for the first three months of 2020, up 13 per cent on the same period last year. Most of Alphabet’s revenues – $33.8bn in this quarter – come from advertising. The company’s net income for the period was $6.8bn.

Chief executive Sundar Pichai said:

For our advertising business, the first two months of the quarter were strong. In March, we experienced a significant and sudden slowdown in ad revenues. The timing of the slowdown correlated to the locations and sectors impacted by the virus and related shutdown orders. As the impact of COVID-19 came into view, we delayed some ad launches and prioritized supporting our customers as many adjusted their strategies. We’re focused on products where we can help most advertisers and merchants during the crisis.

On Wednesday, Facebook reported revenues of $17.7bn for the first three months of the year, up 18 per cent. Nearly all of its turnover – $17.4bn in this quarter – comes from ads. Facebook’s net income for the period was $4.9bn.

The company said:

After the initial steep decrease in advertising revenue in March, we have seen signs of stability reflected in the first three weeks of April, where advertising revenue has been approximately flat compared to the same period a year ago, down from the 17 per cent year-over-year growth in the first quarter of 2020.

In normal times, shareholders in large tech companies expect nothing but growth. But with share prices in Alphabet and Facebook both soaring this week – up to levels last seen in early March – investors appear to have been pleasantly surprised by their results and future prospects.

Picture: Reuters/Stephen Lam

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