Facebook's ads business is being hurt by coronavirus — even though the lockdown has caused unprecedented usage

FILE - In this Wednesday, Oct. 23, 2019 file photo, Facebook CEO Mark Zuckerberg testifies before a House Financial Services Committee hearing on Capitol Hill in Washington on Facebook's impact on the financial services and housing sectors. Facebook CEO Mark Zuckerberg plans to throw his support behind international reforms that would require Silicon Valley tech giants to pay more tax in Europe. (AP Photo/Andrew Harnik, File)

  • Usage of Facebook has skyrocketed due to coronavirus lockdowns.
  • But its ad business isn’t getting boosted, as much of the activity is on unmonetized services, while advertisers are pulling back due to the pandemic.
  • On Tuesday, the company published a blog post detailing how the coronavirus outbreak is affecting the business.
  • Messaging and group video-chats are seeing particular spikes in usage.

Usage of Facebook is booming. But its ads business isn’t seeing the benefit.

The Silicon Valley-based social networking firm is seeing extraordinary traffic on its various apps as users turn to tech to cope during the unprecedented coronavirus lockdowns around the globe, but at the same time its core advertising business is under pressure, the company has said.

On Tuesday, Facebook published a blog post by analytics VP Alex Schultz and engineering VP Jay Parikh broadly outlining the coronavirus’ impact on the company’s infrastructure and business. “In many of the countries hit hardest by the virus, total messaging has increased more than 50% over the last month,” they wrote. In Italy, one of the epicenters of the pandemic, Facebook has seen “time in group calling (calls with three or more participants) increase by over 1,000% during the last month.”

But this doesn’t necessarily translate into more advertising dollars, which makes up the vast majority of Facebook’s revenue.

The two executives wrote: “We have received questions about revenue, so want to provide some context here too: Much of the increased traffic is happening on our messaging services, but we’ve also seen more people using our feed and stories products to get updates from their family and friends. At the same time, our business is being adversely affected like so many others around the world. 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.”

In other words, Facebook doesn’t make money off certain forms as easily (or at all) as it does its core News Feed, and advertisers are also spending less on ads due to the associated economic impacts of COVID-19 and the associated quarantines.

The executives likened the increased activity to surges that it sees during New Year celebrations or the Olympics — but much more sustained. “Maintaining stability throughout these spikes in usage is more challenging than usual now that most of our employees are working from home … We’re monitoring usage patterns carefully, making our systems more efficient, and adding capacity as required. To help alleviate potential network congestion, we are temporarily reducing bit rates for videos on Facebook and Instagram in certain regions. Lastly, we’re conducting testing and further preparing so we can quickly respond to any problems that might arise with our services.”

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Source: businessinsider
Facebook's ads business is being hurt by coronavirus — even though the lockdown has caused unprecedented usage