Facebook (FB): Small businesses turn to social media to drive revenue amid the pandemic

During the COVID-19 pandemic, a large number of people turned to social media sites like Facebook Inc. (NASDAQ: FB) and Twitter (NYSE: TWTR) in order to get live updates on the crisis, stay connected with family and friends or simply for entertainment purposes. The companies in turn benefited from user growth and higher engagement levels during this period.

However, this was not the only purpose served by Facebook in these times. The social media giant and its subsidiaries WhatsApp and Instagram helped several small and medium businesses go digital in order to continue with their operations amid mass lockdowns and closures. The company has developed a couple of tools that make it easy for these small enterprises to conduct their businesses smoothly.

Digital transformation

The COVID-19 pandemic led a rapid shift to digital platforms and several businesses found it necessary to go online in order to carry on with their trade. Based on data from the US Census Bureau, prior to the pandemic, the share of ecommerce in US retail sales was increasing by an average of 1 percentage point a year for the past four years. In the second quarter of 2020, this share rose by 4 percentage points, reflecting four years of change in just three months.

Facebook currently has over 200 million businesses using its free tools to reach customers and over 10 million active advertisers using its services each month. A large portion of these advertisers are small and medium-sized businesses.

Products

As the number of enterprises that come online increases, Facebook has been rolling out a number of products in order to help these businesses operate smoothly. The Facebook Small Business Suite helps businesses manage their profiles and pages across the company’s apps and stay connected with customers.

Products such as Facebook Shops, Instagram Shops, Instagram Checkout, and Business Catalog help businesses display their products and reach more customers while also helping customers find the products they are looking for.

Through its tools, Facebook is making it easy for businesses to conduct trade using all three of its platforms – Facebook, WhatsApp and Instagram – and for customers to easily get in touch with these businesses to find their required products.

Facebook also launched the Paid Online Events tool to help users generate revenue through live-streaming talks, classes and other events.

Regulations

Most of these small and medium-sized businesses survive through personalized advertising and Facebook believes that strict regulations could make it difficult for them to continue their operations. Changes in the regulatory environment could pose a threat to how these enterprises manage to stay in business and the company expects to see headwinds to ad targeting and measurement from these changes in 2021.

Click here to read the full transcript of Facebook Q3 2020 earnings conference call