Facebook’s ads business weakening despite surge in usage

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(March 25): Facebook Inc. said its advertising business is taking a hit in some parts of the world as a result of the Covid-19 pandemic, even as demand for information and messaging drives an “unprecedented” spike in usage for many of its services.

“Our business is being adversely affected like so many others,” the world’s largest social network wrote in a blog post on Tuesday.

Many of Facebook’s products, including messaging and voice calls through Messenger and WhatsApp, have seen a dramatic increase in traffic as people stay home or remain isolated from friends, family and colleagues. Messaging has jumped more than 50% “in many of the countries hit hardest by the virus,” Facebook said, adding that voice calls in those regions have more than doubled. In Italy, where the coronavirus has claimed more deaths than any other country, time spent on Facebook products has soared by 70%.

Still, those increases aren’t going to translate into more advertising dollars. The services that are booming in popularity during the outbreak aren’t apps or products where Facebook has robust ad businesses, meaning the company isn’t seeing a boost in sales from the surge in use. The company gets more than 98% of its revenue from advertising.

“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,” Facebook wrote.

Usage has been so high that simply keeping the services up and running has been “more challenging than usual,” the Menlo Park, California-based company said. “Our services were built to withstand spikes during events such as the Olympics or on New Year’s Eve. However, those happen infrequently, and we have plenty of time to prepare for them,” the company’s blog reads. “The usage growth from Covid-19 is unprecedented across the industry, and we are experiencing new records in usage almost every day.”

Facebook isn’t the only online business to say advertising is being curbed by the virus. Twitter Inc. on Monday announced that its ads business is also hurting, even though it’s also seeing record usage from people eager to get updates and news about the pandemic. Twitter took the more concrete step of revising its first-quarter revenue guidance, and tossed out full-year expectations that it had shared with investors in early February.

While Facebook doesn’t give public quarterly revenue forecasts, analysts on average had projected the company would post a 22% jump in sales for the first quarter, to $18.3 billion, according to a Bloomberg survey. Facebook shares, which had gained 8.7% in regular New York trading on Tuesday, slipped about 1% in extended trading. The stock is down 22% for the year.

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