Tech

Facebook says it's seeing weakening ads business in countries hit by COVID-19

Key Points
  • Despite an increase in engagement on its some of its platforms "in places hit hardest by the virus," Facebook says it's seeing a weakening in its ads business in countries taking actions to reduce the spread of COVID-19. 
  • Facebook stock was down a percent in after-hours trading Tuesday afternoon. 
VIDEO0:5500:55
Facebook sees weakening in its ads business due to the coronavirus

Despite an increase in engagement on its some of its platforms "in places hit hardest by the virus," Facebook says it's seeing a weakening in its ads business in countries taking actions to reduce the spread of the COVID-19 coronavirus

"As the pandemic expands and more people practice physically distancing themselves from one another, this has also meant that many more people are using our apps," the company said in a blog post titled "Keeping Our Services Stable and Reliable During the COVID-19 Outbreak." The post discussed increased usage of its products in areas hard-hit by the outbreak, such as Italy. 

The post added further down that the company has "received questions about revenue," and said that much of the increased traffic is on messaging services but is also seeing people use "feed and stories products" to get updates from other users. 

"At the same time, our business is being adversely affected like so many others around the world," the post reads. "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's announcement comes one day after Twitter withdrew its revenue and profit forecast for the first quarter as well as its outlook on costs for the full year, citing the potential impact of the spreading coronavirus on advertiser demand. Twitter's usage is up, but uncertainty surrounding the severity of the economic impact of the pandemic will be likely to weigh on ad budgets.

Earlier this month, Needham analysts lowered their estimates for Facebook's revenue for the first part of the year due to the spread of coronavirus, its effects on consumer demand and the fallout for advertising. Analysts wrote that channel checks showed lower spending in travel, retail, consumer packaged goods and entertainment, which together represent 30% to 45% of Facebook's total revenue. They also wrote that six of the largest 10 advertising countries were "currently COVID-19 hotspots."

Facebook stock dropped slightly after hours on the news, after rising more than 8% during a record day for market gains.

VIDEO1:0601:06
Twitter withdraws guidance for first 2020 quarter due to the coronavirus