Facebook is losing active users for the first time in its 18-year history.
Parent company Meta Networks (formerly known as Facebook) acknowledged that the number of daily active users fell to 1.929 million in the last quarter of 2021, compared to 1.93 billion in the previous quarter.
Although it may not seem like much when compared to the total figure, it is the first fall suffered by the social network founded in 2004 by Mark Zuckerberg.
The value of Meta’s shares plummeted almost 27 % on the New York Stock Exchange on Thursday . This is the largest drop in a single day that a company in the US has experienced.
As a result, Meta lost around US$237 billion in market value.
The reasons?
Chief Executive Mark Zuckerberg said the company’s sales growth took a hit as audiences, especially younger users, turned to competitors such as TikTok and YouTube .
Meanwhile, advertisers are also cutting costs.
“We believe that competitive services are negatively impacting growth, particularly with younger audiences,” said Chief Financial Officer Dave Wehner.
Facebook announced the change of its name to Meta last October. Zuckerberg wants the company to focus on developing the metaverse.
The power of TikTok
Meta, which owns the world’s second-largest digital advertising platform after Google, also said it was affected by privacy changes in Apple’s operating system.
The changes have made it harder for brands to target and measure their advertising on Facebook and Instagram, and could have an impact “on the order of $10 billion” this year, according to Wehner.
Meta’s total revenue, most of which comes from ad sales, rose to $33.67 billion, narrowly beating market predictions.
It also forecast revenue of between $27 billion and $29 billion for the coming quarter, lower than analysts had expected.
TikTok reported in September that it had 1 billion active global users . The social network, characterized by short videos, is owned by the Chinese company ByteDance.
In January 2018 TikTok had 55 million global users and the number grew to 271 million in December of the same year; and reached 507 million users a year later.
While Meta has been making its own investments in video to compete with TikTok, they make less money from it than traditional Facebook and Instagram feeds .
Zuckerberg said he was confident investments in video and virtual reality would pay off, as they have with previous bets on mobile advertising and Instagram stories .
In fact, Facebook launched a similar video feature, known as Instagram Reels.
But, he noted, the company did not have to deal with a major rival during previous changes in strategy.
“The teams are doing pretty well and the product is growing very quickly,” he said. “What’s somewhat unique here is that TikTok is already such a big competitor and also continues to grow at a fairly rapid rate.”
Is Meta in decline?
Analysis by James Clayton, North American Technology Reporter
Facebook has always been a growing platform.
Each quarter its global figures have gone in one direction.
However, in recent years growth has stagnated in Europe and the United States, something that was masked by the increase in users in other parts of the world.
Facebook just isn’t as popular with young people as it once was. As the company itself has acknowledged, TikTok is hurting its business
But there are also other reasons why investors are worried about Meta.
He changed his name because he wanted to focus on the metaverse. But Meta is still nowhere near building a metaverse, a dream.
Instead, it’s pumping billions of dollars into trying to create one, all because Mark Zuckerberg thinks there’s an appetite for it, a big risk.
Perhaps the answer to Meta’s immediate problems would be to buy TikTok? US regulators would never allow that because of competition laws.
And many in Silicon Valley now see Facebook as a poisonous brand. It’s certainly not a good place to work in the same way it was ten years ago.
That makes attracting talent more difficult
Meta has some serious problems ahead. And the setbacks these days could be just the beginning.
