What is the profit in the advertising business

Tech companies: billions in profits despite the corona crisis

The big tech companies are benefiting from the changed behavior of users and advertisers in the corona pandemic. The trend towards shopping on the Internet brought Amazon a record profit in the past quarter. In its advertising business, Facebook is benefiting from the fact that more small companies are going online to absorb the crisis. At Google, among other things, the business of the video platform YouTube is booming, while people are more at home. And at Apple, the business with Mac computers and iPads grew in times of working from home and online learning.

Amazon increased quarterly sales year-on-year by 37 percent to 96.1 billion dollars (82.3 billion euros). The profit tripled to the previous record of $ 6.3 billion. "We see more customers than ever before who buy gifts early," said Amazon boss Jeff Bezos. This is an indication that an "unprecedented" Christmas business is imminent.

Amazon has forecast revenues between $ 112 billion and $ 121 billion for the current quarter. It would be the first time that the company has broken the $ 100 billion mark in one quarter. With its delivery services, Amazon had already benefited greatly in the previous quarters from the fact that the demand for orders on the Internet rose sharply during the pandemic. Amazon's lucrative cloud business with IT services and storage space on the Internet has recently continued to flourish.

At Facebook, analysts were still worried about business at the beginning of the crisis. Small and medium-sized businesses make up a large proportion of Facebook advertisers. Many of them - such as cafes or restaurants - have been hit hard by the pandemic. But it turns out that Facebook's business is even getting a boost as more companies go online looking for new revenue in the pandemic. The turnover of the online network, which is mainly achieved with advertising, rose by 22 percent to 21.2 billion dollars. The bottom line was a profit of $ 7.85 billion - an increase of 29 percent.

As an example, top manager Sheryl Sandberg named a family company that otherwise sold soaps from its own production at weekly markets. In the pandemic, she is now using Facebook as a platform and has expanded her business. Facebook builds on the argument that the online network plays a role worth protecting for the economy during the crisis - and, for example, data protection restrictions could ultimately damage the economy.

The number of daily active Facebook users rose within three months by 30 million to around 1.82 billion. At least one app from the group - such as Instagram and WhatsApp - is used by 2.54 billion users every day.

Thanks to online advertising, the profits of Google parent Alphabet shot up by almost 60 percent to $ 11.2 billion, while revenues grew by 14 percent to $ 46.2 billion.

After a setback in the previous quarter, Google's advertising business was up and running again and contributed the largest share of sales at $ 37.1 billion. In addition, the advertising revenues of the video subsidiary Youtube, which rose by a third to five billion dollars, as well as the cloud business with IT services on the Internet flourished.

Unlike these companies, Apple still does a lot of its business selling devices. And here Apple had a problem in the past quarter: The new iPhone generation was not presented as usual in September, but only a month later. That meant for the quarter a profit decline of 7.4 percent to 12.7 billion dollars.

IPhone sales plummeted year-on-year by a fifth to around $ 26.4 billion. But: The group's total revenues grew by one percent to $ 64.7 billion. This was ensured by increased business with iPads and Mac computers, among other things, as well as subscriptions for streaming and other services.

The exciting question will now be whether the Christmas quarter for the new iPhone 12 is as strong as usual. CFO Luca Maestri said in a conference call with analysts that the group expects growth in the business. Sales with Macs rose in the past quarter by 29 percent to a good nine billion dollars. The iPad business grew 46 percent to $ 6.8 billion.

At the same time, the successful tech giants are increasingly being targeted by competition authorities, including in their home market, the USA, where regulators have so far tended to let the reins loose. Last week, the US Department of Justice filed a long-awaited competition lawsuit against Google. It accuses the group of using its market power in Internet searches and related advertising in a prohibited manner.

Only Twitter gained just one million new users in the past quarter, despite the great attention it received from the US election campaign, and thus seriously disappointed investors. The Twitter share fell in after-hours trading on Thursday at times by more than 16 percent.

In view of the election and the resumption of games in US sports leagues, analysts had expected an additional nine million users. For some time now, Twitter has only cited the number of users that the service can reach with its advertising on a daily basis. It rose from 186 to 187 million within three months. In the home market of the USA, the value stagnated at 36 million. Meanwhile, Twitter's sales increased year-on-year by 14 percent to $ 936 million. The profit fell in the third quarter by a good fifth to around 28.7 million dollars.

Price slide in tech stocks

A slide in the price of tech stocks weighed on the US stock exchanges at the end of the week. The Dow Jones index of standard values ​​opened on Friday 0.6 percent to 26,515 points. The broader S&P 500 lost 0.5 percent to 3,291 meters. The index of the technology exchange Nasdaq fell by 0.8 percent to 11,095 points. The record increase in new coronavirus infections a few days before the presidential election was also on the nerves of investors. The Dow is heading for the weakest week since the Corona crash in March. "I wouldn't be surprised if sales jumped up again shortly before the vote," said Ryan Detrick, market strategist at financial services provider LPL Financial.

At the top of the sales list were Apple shares, down 3.5 percent. The Amazon and Facebook papers were also under pressure.

More on the subject: Bill Gates, Jeff Bezos, and Elon Musk: Tech billionaires are some of the richest people in the world. Five rules for your success.

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