The coronavirus pandemic has prompted more people to turn to social networks to keep in touch with their friends and family.
Image by Pixabay/illustration by CNET
Facebook’s multibillion dollar ad business continues to grow even as the coronavirus pandemic hobbles the economy and high-profile brands boycott the company to get it to more aggressively combat hate speech. The strong performance comes as the government ramps up pressure on Facebook amid concerns it’s grown too powerful.
The world’s biggest social network reported second-quarter earnings on Thursday that beat Wall Street’s expectations, a day after Facebook CEO Mark Zuckerberg testified before US lawmakers in a lengthy antitrust hearing. Joined by Apple CEO Tim Cook, Google CEO Sundar Pichai and Amazon CEO Jeff Bezos, Zuckerberg told lawmakers that the company wouldn’t let advertisers determine its content policies.
During a call with analysts on Thursday, Zuckerberg said that efforts to go after internet companies that make money from online advertising would hurt small businesses that rely on Facebook’s products.
“Is that really what policymakers want in the middle of a pandemic and recession?” Zuckerberg said. “The right path I believe is regulation that keeps people’s data safe while allowing the benefits of this kind of personalized and relevant advertising.”
Congressional concerns about antitrust are on a long list of challenges the company has faced this year. Activists, commentators and even Facebook employees have criticized the company for exempting posts by politicians, including President Donald Trump, from fact-checking, and for failing to remove or take action misleading posts about voting or those incite violence against protesters. Facebook says Trump’s posts didn’t violate its rules. Still, it will start labeling all voting content, including the president’s, and directing users to an online voter information hub. The company also said it would label politicians’ posts if they violate its rules but are kept up because it’s in the public interest to be able to view them. Content that suppresses voting and incites violence will be removed even if it comes from a politician.
Facebook has also been criticized for how it enforces its rules against hate speech. Civil rights groups launched a campaign called Stop Hate for Profit that called on advertisers to pause spending on Facebook in July. The groups, which include the Anti-Defamation League, the NAACP and Color of Change, say it became apparent that Facebook hasn’t done enough to combat hate speech in the wake of the police killing of George Floyd, a 46-year-old Black man in Minneapolis. Floyd’s death sparked conspiracy theories and stoked misinformation that spread on social networks, including Facebook, as nationwide protests calling for racial justice and an end to police brutality spread. The organizers of the boycott want Facebook to hire an executive with a civil rights background, allow people who have faced harassment or hate on Facebook to speak to a company representative, and notify advertisers if their ad appeared next to content that the social network removed for violating its rules.
More than 1,000 businesses joined the campaign, including major brands such as The North Face, an outdoor clothing maker; Unilever, a consumer goods giant; and Verizon, a telecommunications giant. Some of the businesses, which pledged to halt ad spending on Facebook for the month of July, also paused activity on Google-owned YouTube, Twitter and other social networks.
Zuckerberg pushed back against the idea that the tech company isn’t taking hate speech and other offensive content seriously.
“Some seem to wrongly assume that most of the content on our services is about politics, news, misinformation or hate,” he said on a call with analysts to discuss the financial performance. “And let me be clear, it’s not. These make up a small part of the content on our services although they are all things that people generally tell us they’d like to see even less of.”
On Thursday, Facebook reported revenue of $18.69 billion in the second quarter, which ended June 30. The social network beat Wall Street’s expectations of $17.4 billion.
Facebook earned $1.80 per share during the second quarter, which was above the $1.39 per share that analysts surveyed by Thomson Reuters expected. Earnings nearly doubled compared with the same period last year, when Facebook had higher income tax and legal expenses.
Monthly active users rose to 2.7 billion, up 12% from the same period last year.
The ad boycott’s impact on the company would be most visible in July, the start of the third quarter. Facebook said revenue in the first three weeks of July was up 10% and it expects a similar growth rate for the full quarter. The considered the economic uncertainty caused by the coronavirus pandemic, the ad boycott and other factors when providing the guidance.
“Our business has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook,” Facebook said in a statement.
The coronavirus pandemic has also impacted Facebook’s workforce of 52,534 people.
“With covid growing quickly in the U.S., there’s currently no end in sight for when our teams here will be able to return to our offices,” Zuckerberg said. “It is incredibly disappointing because it seems like the U.S. could’ve avoided this current surge in cases if our government had handled this better.”
Some analysts said they think Facebook-owned Instagram has helped the main social network weather financial uncertainty.
“Although Facebook doesn’t release details about Instagram’s revenue, we believe that Instagram has been a rapidly growing contributor to the company’s total revenue, and that its success is helping to buoy Facebook as a whole,” said Debra Aho Williamson, a principal analyst with eMarketer.
Facebook’s stock jumped by more than 6% in after-hours trading, to $250 per share.
Zooming in on video
Facebook has doubled down on video, as more people have turned to the social network to keep in touch with family and friends during the COVID pandemic.
In April, Facebook released a feature that lets users video chat with multiple people through its Messenger messaging service even if they don’t have a Facebook account. The company also ramped up its video chat efforts as Zoom, a videoconferencing app, grew more popular.
Last week, Facebook said users will be able to livestream their video chats from Messenger Room, which can include up to 50 people, on the social network. The company envisions the tool will be used to broadcast events such as book club meetings and fitness classes. In April, Facebook-owned Instagram also launched a way to fundraise during a live video.
Correction, 1:24 p.m.: Fixes percentage rise in monthly average users.