<https://www.theguardian.com/technology/2022/feb/03/why-facebook-shares-are-in-freefall-meta-zuckerberg>
Mark Zuckerberg’s social media empire felt the full force of investors’
concerns about its growth prospects on Thursday, as the revelation of
Facebook’s first-ever drop in daily users helped trigger a selloff, with
shares down by a quarter.
Here are some key points to help explain the selloff, which has wiped
about $220bn (£162bn) off Meta’s market value.
Declining user numbers at Facebook
Facebook is Meta’s biggest app and it recorded its first fall in daily
active users – a key growth metric – since the company was founded in
2004. Global daily users dropped from 1.93 billion in the third quarter
of 2021 to 1.929 billion. It was led by a decline in users in Africa and
Latin America, which is worrying for Meta because it needs to grow
outside of its main market in the US, where growth fell too, albeit not
for the first time.
Last year a whistleblower, Frances Haugen, released internal documents
that included presentations warning that Facebook was losing young
users. One document revealed that “engagement is declining for teens in
most western, and several non-western, countries”.
TikTok is a problem
Zuckerberg, Meta’s founder and chief executive, identified the
video-sharing app TikTok as a key contributor to the user growth
problem. “People have a lot of choices for how they want to spend their
time, and apps like TikTok are growing very quickly,” he said on
Wednesday’s earnings call. Chinese-owned TikTok has 1 billion users
worldwide and is one of the reasons why Meta is struggling to compete in
the market for young consumers.
On the call, Zuckerberg said he was hopeful Facebook’s rival to TikTok,
Reels, would help win back young users. “This is why our focus on Reels
is so important over the long-term, as is our work to make sure that our
apps are the best services out there for young adults.” In the meantime,
however, it means slower revenue growth, he admitted.
.
Hits to revenue growth
Meta makes 97% of its revenue from advertising, by building up profiles
of its users that can then be matched to advertisers’ needs. So if an
advertiser is looking for a consumer in a certain location, of a
specific demographic and with certain hobbies, then Meta can direct
those ads towards particular groups thanks to the data it has compiled
about them.
Meta, which also owns Instagram and WhatsApp, saidrecent changes with
Apple’s iOS software for iPhones had hurt the business. Apple now
requires users to give permission for companies such as Meta to gather
data about them as they browse across the web. Unsurprisingly, users
have said no thanks and it has made its ad targeting less effective.
Mark Zuckerberg walks with Sheryl Sandberg.
Sheryl Sandberg and Mark Zuckerberg: company has ‘many targeting and
measuring tools’. Photograph: Kevin Dietsch/Getty Images
Sheryl Sandberg, Meta’s chief operating officer and architect of
Facebook’s advertising strategy, said during an investor call on
Wednesday that the company had ways of targeting users with less data.
“There are also a lot of things that small businesses and large
businesses can do to take advantage of the many targeting and
measurement tools we have,” she said.
It should be pointed out that overall revenue did grow in the three
months to December, up to $33.7bn compared with $28.1bn for the same
period last year. Net income – a US measure of profit – was $10.3bn for
the quarter, down nearly $1bn on last year. Nonetheless, Meta remains a
very wealthy and profitable business.
the meta logo on a smartphone with a metaverse computer graphic in the
background
Meta is betting on the metaverse being the next big thing. Photograph:
Andre M Chang/ZUMA Press Wire/Rex/Shutterstock
Patience – and money – is needed for the metaverse
The metaverse is a catch-all term for a blending of the physical and
digital worlds, where people carry out their professional and social
lives via a mix of virtual and augmented reality. Zuckerberg is so
convinced it is the next big thing in tech that he renamed the company
from Facebook Inc to Meta. But it is years away from being a fully
fledged part of people’s lives. So the results from Meta’s virtual
reality unit – Reality Labs, which includes the top-selling Oculus VR
headsets – showed a loss of $3.3bn on revenues of less than $1bn. This
is the future of Meta’s business, so expect the revenues to grow, as
well as the costs.
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