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Sunday, February 6, 2022

RSN: FOCUS: What an Outright Terrible Week It Was for Facebook!

 

 

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06 February 22

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Mark Zuckerberg. (image: Politico/AP/iStock)
FOCUS: What an Outright Terrible Week It Was for Facebook!
Aaron Mak, Slate
Mak writes: "Facebook's parent company Meta just had an unprecedented, jaw-droppingly bad week."

Facebook’s parent company Meta just had an unprecedented, jaw-droppingly bad week. In an earnings call on Wednesday, executives reported that for the first time in its history Facebook had actually lost daily active users in the previous quarter—about a million of them, to be exact. Meta also spent $10 billion on its virtual reality projects, which CEO Mark Zuckerberg has pitched as the company’s future, through the Reality Labs department. In the wake of the dismal disclosure, Meta dropped more than $237 billion in value on Thursday, the biggest one-day loss ever in the U.S. stock market. (That’s more than the market cap of Netflix or Twitter.) Zuckerberg’s own net worth also fell by $31 billion. It was shocking news for a company that has pretty reliably reported solid-to-fantastic numbers in the past, even during periods of scandal and public ire.

The forces working against Meta are formidable and multifarious. During the earnings call, executives specifically blamed a 2021 privacy update that Apple instituted in iOS for hitting Meta’s ad sales by about $10 billion this year. (About 97 percent of Meta’s revenue comes from advertising.) Apple’s update presents users with pop-up notifications asking if they want want to prevent certain apps from sharing identifiable personal information—like location or browsing history—with third parties. A study by the mobile marketing analytics company AppsFlyer in October indicated that 62 percent of iPhone owners who viewed such notifications chose to opt out. Users on iPhone are reportedly more likely to spend money on items that they see in mobile ads. The New York Times notes that, because advertisers are having a tougher time targeting Facebook users now, they’ve been devoting more of their ad budgets to Google instead. Google, which reported record sales on Tuesday, is less reliant on Apple devices for gathering data on its users. Zuckerberg said during the earnings call that Facebook would be rebuilding its ads infrastructure to adapt to this new landscape, though didn’t give many specifics on what changes might be implemented. COO Sheryl Sandberg also said that it would take some time to figure out new ways to serve relevant ads without relying on personal data collection.

Attracting and retaining daily users is also a big headache for Meta. Chief Technology Officer Dave Wehner said in the earnings call that Facebook saw a reduction in usage as coronavirus restrictions have loosened, since people aren’t stuck trying to entertain themselves at home. He also blamed internet price hikes in India, where 340 million of Facebook’s users reside. TikTok in particular has been siphoning young users away from Meta’s platforms despite the larger company’s efforts to clone the trendy app with Reels in Instagram and Facebook. While Reels have vecome the top source of engagement on Instagram, the company has been struggling to get users to buy products from video ads. (Users often skip ads in video form.) However, executives believe that Reels will net profits in the long run, if not immediately. Zuckerberg said during the earnings report, “And while video has historically been slower to monetize, we believe that over time short-form video is going to monetize more like feed or Stories than like Watch – so I’m optimistic that we’ll get to where we need to be with Reels too.” The CEO’s attempt to pivot the company to virtual reality and metaverse platforms is another endeavor that doesn’t seem to be paying off in the short term while incurring steep costs. He seemed to admit that the company still had a lot to figure out in terms of moving forward in the metaverse, telling investors, “Although our direction is clear, it seems that our path ahead is not quite perfectly defined.” It seems unlikely that the company will pull back too much, if at all, on its pivot, given that competitors like Apple, Google, and Microsoft are also investing in the metaverse.

Adding salt to the wound, Snapchat reported its first ever net profit and higher-than-expected user growth on Thursday, sending shares up more than 53 percent. After Meta repeatedly failed to acquire Snapchat, it cloned the platform’s features with Instagram Stories, which turned out to be a big success. Investors feared that the move would end up tanking Snapchat, and it seemed as though Meta had the upper hand for a while. Snapchat can at least enjoy this rare victory—for however long it might last.


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