META Meta Platforms Inc

By Jeff Horwitz and Suzanne Vranica 

Facebook Inc. said usage of its products was skyrocketing because of the coronavirus pandemic but warned that increased activity wouldn't shield the company from the online-advertising pullback roiling Silicon Valley and Madison Avenue alike.

In a post on Tuesday afternoon, Facebook said total messaging across the platform's services has increased 50% in countries hit hard by the virus, with video messaging more than doubling. In Italy, which has undertaken some of the strictest restrictions on public life of any country outside China, group video calling is up by more than 1000% from a month ago and usage of all Facebook apps is up 70%.

Facebook also owns Instagram as well as the popular messaging service WhatsApp.

The company said the higher usage wouldn't protect it from expected declines in digital advertising across the globe.

"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," wrote Alex Schultz, Facebook's vice president of analytics, and Jay Parikh, vice president of engineering.

The company didn't provide official earnings guidance, but the executives said "our business is being adversely affected like so many others around the world."

Facebook's detailed steps the company is taking to increase capacity and reduce the strain that heightened video- and calling-traffic puts on communications structure. The announcement is in keeping with others by advertising-based tech platforms and media of reduced financial targets.

Twitter Inc. on Monday said its financial performance would fall short this quarter as a result of the pandemic.

Google parent Alphabet Inc. is also in a perilous spot. Alphabet makes almost all of its money from online advertising in areas like search, maps and video, and its biggest clients seem sure to pull back. In one early warning sign, travel conglomerate Booking Holdings Inc. -- one of the world's biggest online advertisers -- said Monday it would "dramatically" pare back its marketing costs.

Google has also pinned its future on making more from advertising connected to "real-world" queries, such as turn-by-turn direction searches and as a paid go-between for individuals looking to find local businesses like plumbers. Many consumers, however, are now confined to their homes.

Alphabet doesn't give guidance on coming earnings, and a spokesman didn't respond to a request for comment.

"Marketers are cutting spend across the board," analysts at RBC Capital Markets wrote Monday. "Want another datapoint? Type 'Las Vegas Hotels' in your Google search bar. We're seeing 0 paid ads. Can't ever recall seeing that."

As companies begin to pull back on advertising spending because of the coronavirus pandemic and growing economic uncertainty, digital and local media companies are more vulnerable to such retrenchment in the short-term, ad buyers said.

Unlike national television ads, which are often purchased many months in advance and are harder to cancel, most digital ad buys can be canceled within days, buyers and industry analysts say.

"If you're Marriott, you don't get to cut your budget to TV," said Laura Martin, a senior analyst for Needham & Company. "Where you can cut immediately is digital."

Indeed, the New York Times was among the first companies to warn that the virus was causing an ad slowdown. The company cut its first-quarter advertising-revenue forecast at the beginning of March, citing a slowdown in international and domestic ad bookings because of uncertainty and anxiety about the virus.

Another issue facing publishers and digital media companies, such as Facebook and Twitter, is that some advertisers are trying to avoid news content that has turned even more negative amid the spread of the coronavirus.

Many companies "are leery of news outlets and social media sites because there is so much negative content right now," said one ad buyer.

Brands have been burned several times in recent years when their ads have appeared next to inappropriate or offensive content, including fabricated news or racist content.

Categories of digital advertising at the highest risk include staples for Facebook: Travel, entertainment, retail and consumer packaged goods account for 45% of mobile advertising, said Ms. Martin, and broadly equate to Facebook's revenue.

Under normal circumstances, the increased time that cooped-up Facebook and Instagram users spend on the platform would allow the company to profit from selling more advertising inventory. But the increased usage that the company has noted is paired with decreased advertising demand, meaning that auction prices for Facebook ads would likely plummet unless the company chooses to restrict the supply.

With fewer advertisers competing for Facebook users' attention, each impression would be worth less across the board, unless the company chooses to cut back on the number of ads shown.

How Facebook would address its increased supply and reduced demand isn't clear, Ms. Martin said, given a choice between selling more advertising at lower rates or trying to maintain prices but running fewer ads overall.

Facebook's stock is down 28% year to date, slightly more than the Nasdaq index but slightly less than the S&P 500.

Reductions in advertiser demand could also affect the content creators that have built audiences on the platform. Klear, which provides analytics for Instagram influencer marketing, said Tuesday that the number of Instagram stories posted and engagement per post were both up sharply over the past week. However, Klear found, the number of sponsored posts labeled with #ad dropped by 25%.

Rob Copeland contributed to this article.

Write to Jeff Horwitz at Jeff.Horwitz@wsj.com and Suzanne Vranica at suzanne.vranica@wsj.com

(END) Dow Jones Newswires

March 24, 2020 18:21 ET (22:21 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.