Facebook enters e-commerce due to COVID-19-induced plunge in revenue?

Facebook is opening its Shops online stores feature

Facebook in the middle of May launched its new feature named Shops – which is very similar to online shopping platforms and is a direct foray into e-commerce. The tool supports businesses in setting up virtual stores to sell items both on Facebook and Instagram.

Facebook's Shops targets small- and medium-sized enterprises (SMEs) that have taken a hit from the health crisis. About 30 per cent of SMEs across the globe have seen operations disrupted to a degree and the rate will increase to 40 per cent if the pandemic grows more serious, according to a recent survey by the platform.

On the other hand, CEO Mark Zuckerberg said that entering the e-commerce sector will also help Facebook lure in more advertisers, whose numbers declined gravely since the outbreak.

Facing the impacts of COVID-19, many businesses cut advertising expenses. This has resulted in the most common advertising platforms like Facebook and Google seeing reduced earnings.

According to the Wall Street Journal, Facebook's advertising turnover took a hit in March. Zuckerberg had also forecast that the sales of the social networking site would drop due to COVID-19. The company even cut its expenditure plan for the year by $3 billion to mitigate lost advertising revenue.

Alphabet – Google’s parent company – said that its performance was strong during the first two months of the year before the slump set in in March and April. Ruth Porat, financial director at Google, said that the firm has yet to see further deterioration thus far in April, but cautioned that the second quarter will be a "difficult one" for the company. According to Bloomberg, Alphabet shares climbed 7 per cent during post-market trading on April 28, after a 3 per cent fall during the regular session, with investors seemingly taking solace.