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As Coronavirus Spreads in India, Facebook, Google Stare at Massive Losses in Ad Revenue

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, a new report has predicted. 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, Variety reported on Thursday, quoting Cowen’s data.

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. “For full-year 2020, Google will generate $54.3 billion in operating income (43 per cent adjusted EBITDA margin) and Facebook will pull in $33.7 billion (49 per cent margin),” according to Cowen’s forecast. In a separate 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)”.

Cowen has cut its full-year revenue forecast for Twitter by 18 per cent. “Amazon’s ad business, meanwhile, is �generally less exposed’ to the downturn than other large digital platforms because the company’s advertising is mostly related to product searches”. Facebook has 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. With one-fifth of the world’s population now under lockdown and industries shutting operations amid global supply chain issues, the new coronavirus pandemic is set to deliver a sharp and deep economic shock, a new report has said.

According to analysts at BlackRock Investment Institute, market moves are reminiscent of the darkest days of the financial crisis, but they don’t think this is a repeat of 2008. “Stringent containment and social distancing policies will bring economic activity to a near standstill, and lead to a sharp contraction in growth for the second quarter”, it said.

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Tech

LG Electronics Logged Net Losses of $717 Million in Q4 2019

LG Electronics said that its fourth-quarter deficit widened due to losses in its equity ties with a display-making affiliate, while its mobile business remained in the red. The tech giant said it logged a net loss of $717 million in the October-December period, compared with a $67.7 million net loss a year earlier, Yonhap news agency reported. The company’s operating profit increased by 34.5 percent on-year to 101.8 billion won in the fourth quarter, but this was an 87 percent drop compared to the previous quarter. Sales rose 1.8 percent on-year to $13 billion in the last three months of 2019. For the whole of 2019, LG Electronics’ net income tumbled 87.8 percent on-year to $150.9 million.

Operating profit dropped 9.9 percent on-year to $2.01 billion, but sales inched up 1.6 percent on-year to a record $52 billion. LG Electronics said its equity ties with LG Display Co. hurt its bottom line. The company holds a 37.9 percent stake in the world’s leading OLED panel maker. LG Display, which is scheduled to announce its fourth-quarter earnings on Friday, has been suffering from falling LCD panel prices.

Analysts here expect LG Display to suffer more than $839 million in losses in 2019. Aside from equity losses, LG Electronics saw its mobile business extend a slump to 19 consecutive quarterly losses. LG Electronics’ mobile business unit posted $278 milion in operating loss in the fourth quarter, widening from a loss of $267 million a year earlier. The unit’s sales plunged 21.2 percent on-year to $1.09 billion.

For all of 2019, its mobile business had sales of $4.9 billion, down from $6.62 billion in 2018, while the operating loss was tallied at $847 million, also widening from $661 million in 2018. Analysts here predict that LG Electronics shipped only 29 million smartphones in 2019, down 28 percent from a year earlier.

“Sluggish sales of mass-tier smartphones in overseas markets, increased marketing expenses, and retail inventory adjustments led to operating loss in the mobile business,” the company said.