Facebook (FB) Usage Up on Coronavirus Lockdown, Ad Sales to Wane

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Facebook FB is experiencing a significant jump in usage of its services including Messenger, Instagram and WhatsApp amid the growing incidence of coronavirus (COVID-19) pandemic.

The social-media giant in a recent post stated that total messaging surged more than 50% in countries most affected by the coronavirus in the past month. The company also witnessed increased traffic in its feed and stories products

Moreover, voice and video calling also more than doubled on Messenger and WhatsApp in places bearing the brunt of the coronavirus pandemic.

However, Facebook doesn’t expect this traffic rally to benefit its top line as it doesn’t monetize a number of these services. In fact, its ad-sales is expected to take a hit due to measures like lockdowns and mass quarantines undertaken in a number of countries to control the spread of the virus. Notably, Facebook generated 98.5% of 2019 revenues from advertisements.

Shares of Facebook have declined 21.6% year to date, outperforming the S&P 500 composite’s fall of 30.2%.

Year-to-Date Performance

 

Facebook’s Usage Spikes in Italy

Management at Facebook stated that in Italy, one of the worst-hit countries in the world, time spent across its apps soared by roughly 70% since the beginning of the coronavirus outbreak.

Moreover, Instagram and Facebook Live views doubled in a week. Messaging also jumped 50% and group calling (calls with three or more participants) skyrocketed more than 1,000% in the past month.

Notably, Italy lost 6,820 lives (highest death toll surpassing China) and 69,176 (trails China) are already infected by the deadly coronavirus, per the Johns Hopkins University data. Globally, the number of casualties stand at 18,947 while 424,048 are registered as infected cases.

Conclusion

Facebook’s ad-sales warning follows Twitter’s TWTR withdrawal of first-quarter 2020 and full-year guidance. On Mar 23, in an 8k filing, Twitter withdrew its earlier provided guidance due to the pervasive impact of the coronavirus (COVID-19) anxiety on advertiser demand. (Read More: Twitter Joins Tech Club to Ditch Q1 View on Coronavirus Woes)

Facebook’s caution and Twitter’s guidance withdrawal due to the coronavirus overhang on advertiser demand reflect the severity of the pandemic’s impact on economy. Soft advertiser demand can also ruin prospects of Alphabet GOOGL division Google and Snapchat-parent Snap SNAP, which recognize a huge portion of their revenues from advertisements.

Nevertheless, Facebook’s solid user base in Asia Pacific, growth in Instagram Stories and Feed, and concerted efforts to improve privacy, transparency and authenticity of its platform are expected it grow once normalcy resumes.

Facebook currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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