While throngs of home-bound people turn to the web to relieve their isolation, the heightened activity coursing through channels like Facebook Messenger and WhatsApp isn’t translating into revenue.
On the contrary, parent company Facebook warned Tuesday that the coronavirus has taken a chunk of its ad revenue, denting the company’s first-quarter results — despite all the increased online activity.
According to a blog post published by the social giant, Facebook’s messaging services saw a 50 percent surge in countries that have been hardest hit by COVID-19, compared to the previous month. Voice and video chat in these apps more than doubled.
In Italy alone, usage time in these apps jumped 70 percent, while group calls soared by more than 1,000 percent over last month.
The problem is, the surges are happening in channels that haven’t been monetized. Meanwhile, the company has “seen a weakening in our ads business in countries taking aggressive actions to reduce the spread of COVID-19.”
The company didn’t disclose figures, but that was enough to send shares down: After having closed with an uptick of 8.7 percent on Tuesday, the stock dropped slightly in after hours trading.
Social media may be a critical marker of where businesses are right now in this COVID-19 moment, as advertising tends to suffer when economies falter and times get lean.
Following the 2008 stock market crash, advertising in the U.S. dropped by 13 percent overall. The breakdown: Ad spend fell 27 percent in newspapers, 28 percent in magazines, 5 percent on television and 2 percent online.
Today, apparel, beauty and related sectors hinge on social media, making Facebook’s numbers — as the parent company of Instagram — an important metric to keep an eye on.
Twitter reported a similar scenario. Despite a major uptick in daily active users — to 164 million, up 23 percent year over year and 8 percent from the previous quarter — the company expects decreases in global ad revenue to hamper first quarter 2020 earnings results.
According to chief financial officer Ned Segal, the effect became “more significant” over the last few weeks as the coronavirus graduated to global pandemic status.
The virus and related topics — such as #StupidWHBriefingQuestions, #CoronavirusLockdown, #Covid19Out, and hashtags for various pundits discussing the crisis — tend to dominate Twitter and other online discussions. That turns out to be another critical factor, as brands don’t want to be linked to the virus.
With ad placements today frequently done by bots, not humans, an errant placement could be disastrous in this dire retail environment. So brands are erring on the side of caution by pulling back on ad spend and doing sweeping keyword-blocking.
Now Twitter has joined an ever-lengthening list of companies — from brands including Steve Madden and department stores such as Nordstrom to tech makers like Apple — in pulling its guidance for the quarter. They’re not alone. Hundreds of companies in fashion and other sectors have started bracing themselves and their investors, as the business effects of the virus continue to spread.