The latest quarterly figures from Meta are a warning signal for Facebook, Instagram and Co. Around half a million users have migrated, growth is stagnating and now the share price is also falling. Is this the beginning of the end of the social media king? And why does it go down at all?
Yesterday, Wednesday, Meta, the parent company of Facebook, WhatsApp and Instagram, presented its business figures for the fourth quarter of 2021. And they made both investors and the social media world sit up and take notice.
For the first time in the company’s history, there has been a consecutive decline in daily users on Facebook, from 1.93 billion users to 1.929 billion users. Half a million fewer users a day doesn’t sound dramatic at first. But some fear that this could be the beginning of the end of the social media king.
Meta loses $200 billion in market value in one day
The result could then be seen quickly on the stock exchange. Meta’s share price plunged 24 percent, about $246 per share. In total, Meta lost 200 billion US dollars in market value, an absolute negative record. The magazine Bloomberg even spoke of the largest market value loss of a company on the stock market ever.
Facebook’s growth in Europe and North America has been stagnating for some time. So far, however, the Group has been able to compensate for this with new users in other regions. However, it was precisely these that were now also declining for the first time. Meta recorded the largest churns on Facebook in Latin America and Africa.
This suggests that the global market is saturated. Meta was able to record a slight user growth on Instagram and WhatsApp. But this does not deceive investors about the fact that the great social media king is obviously losing relevance.
Meta: Facebook is “out” with a young audience
This is especially true for younger audiences, who obviously prefer networks like Tik Tok. Meta boss Mark Zuckerberg has tried to counteract this with the new short video format “Reels” on Instagram. But this seems to have been only moderately successful.
As Zuckerberg said when presenting the numbers, “People have a lot of choices about how they want to spend their time and apps like Tik Tok are growing very fast.”
That’s why he wants to expand the focus on Reels even further in the future, Zuckerberg said. Will that alone help? Questionable. Because it is not only the formats that keep young people away from the meta-networks.
Boring, misleading and negative
In an internal market analysis of the group on Facebook, for example, it said: “Most young adults perceive Facebook as a place for people aged 40 or 50 years. Young adults perceive the content as boring, misleading and negative.”
Many also have many negative associations with Facebook, from privacy concerns to online bullying to uninteresting topics.
This is probably not only the case with the young audience. Meta’s networks repeatedly have to contend with allegations of misuse of personal data. And only recently, the statements of the Whistelblowerin Frances Haugen made it clear that the company has deliberately ignored the negative psychological consequences of Instagram on young people.
But these are by no means the only problems of Meta.
Authorities sit Meta, Facebook and Co. in the neck
In both Europe and the USA, politicians are increasingly focusing on the large technology companies.
In the US Congress, on the other hand, Meta boss Mark Zuckerberg seems to be becoming something of a regular guest. In recent years, he has had to endure hearings again and again. It dealt with data protection concerns, but also with competition clauses.
In the US, for example, there are various efforts to limit the monopoly positions of technology companies. At the moment, there is also the consideration of splitting Meta as a group.
In addition, in the case of a group the size of Meta, the authorities naturally also look very closely at new acquisitions in order to prevent a monopoly position of the company.
In some ways, this also inhibits meta growth. Because the company could not – as a fictitious example – simply buy Tik Tok to open up new user groups.
But, and this is Meta’s next problem, there are fewer and fewer start-ups that have any interest in being bought by Meta at all.
Start-ups don’t want to know anything about Meta
The experiences of WhatsApp, Instagram and Oculus have finally made it all too clear that the group is not a good home for young companies.
The WhatsApp founders, for example, migrated because they rejected Meta’s aggressive monetization attempts. Instagram’s founders left the company because their independence was no longer guaranteed. And the founders of Oculus were sawed off.
Word gets around. And so there are few promising candidates who can imagine working with Meta.
Billions in losses on VR technology
Of course, Meta has already recognized that social media will no longer be the group’s driving force in the long term. After all, the new company name Meta and the Metaverse plans are also related to this.
However, as the quarterly report made very clear, this is still a loss-making business so far. Sales of 2.3 billion US dollars in this area are offset by investment costs of 10.2 billion US dollars.
This is understandable. Investments in virtual reality, augmented reality and supercomputers are enormously high and Meta is still at the very beginning. It will probably take at least another ten years before the company is in the black with its new technologies.
Who will topple the social media king from the throne?
Despite all this, it must be acknowledged that Meta is still very profitable. The company was able to record a profit of 40 billion US dollars through ads alone. And 3.6 billion users on all meta-platforms together are also not to be despised.
But the plaster on the façade is crumbling. Because with migrating users, declining relevance, inhibitions in the market and billions in investments in a not yet profitable business area, Meta has very little room to continue growing.
And the competition has long been ready to topple the social media king from the throne.