Facebook cuts ad rates by 20% as business slips in COVID-19 times

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Facebook has reportedly cut its advertisement rates by nearly 20% in recent weeks as ad spending on its platform has taken a severe hit owing to the COVID-19 pandemic.

According to a Wall Street Journal report, there has been 15-20% cut in ad rates on the social media platform in the month of March as compared to February.

Wpromote, a digital marketing agency that handles $130 million in yearly ad spending on the social media platform, told The Wall Street Journal that “Facebook’s rates have declined 25 per cent from February to March”. Another marketing company 4C Insights that manages $350 million in ad spending on tech platforms, said one ad cost on Facebook-owned Instagram to get in front of 1,000 users dipped 22 per cent in the same period.

As more people log on to Facebook from homes, the uptick in usage has not resulted in top ad dollars for the social networking giant. To stem the losses, Facebook is reportedly going after ad budgets that had previously been earmarked for televised sporting events.

According to the report, Facebook is pitching its video ads as an ideal place to spend those ad dollars that would have gone to sponsor sporting events.

Facebook in late March admitted that its ad business has been adversely affected in countries severely hit by the novel coronavirus while non-business engagement like messaging has exploded which is affecting its services like Messenger and WhatsApp.

“Our business is being adversely affected like so many others around the world. We don’t monetize many of the services where we’re seeing increased engagement, and we’ve seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19,” said Alex Schultz, VP of Analytics and Jay Parikh, VP of Engineering.

The novel coronavirus pandemic can wipe out more than $44 billion in global ad revenue for the tech giants Facebook and Google in 2020 as digital advertising runs dry.

According to global investment bank and financial services company Cowen & Co, Google’s total net revenue is projected to be about $127.5 billion — down $28.6 billion. Facebook’s ad revenue for 2020 is forecast at $67.8 billion – a decrease of $15.7 billion. However, Facebook’s advertising business is projected to “bounce back” in 2021, growing 23 per cent (year-over-year) to $83 billion, said the Cowen analyst team.

In a blog post, LightShed analyst Rich Greenfield said that “digital platforms are feeling the pain soonest, given the relative ease of pulling ad spend versus mediums such as television (who are likely to experience far more pain in Q2 than Q1)”.

An ET report

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