Facebook’s User-Growth Machine Comes to a Halt

Facebook’s User-Growth Machine Comes to a Halt
Image: Chip Somodevilla, Getty Images

Though at times it seemed unlikely this day would ever come, the Facebook era of unrelenting user growth has finally come to an end. For the first time in its nearly 18-year-history, Facebook’s users have actually declined.

According to parent company Meta’s Q4 earnings presentation, Facebook lost around a million users between Q3 and Q4 2021. Specifically, the platform reported 1.93 billion daily active users in Q3, though that figure dropped to 1.929 billion last quarter. This marks a sea change for a company previously able to endure an onslaught of scandals, lawsuits, genocide enabling policies, and gut-wrenchingly uncomfortable Congressional hearings, all without losing its most valuable resource: us, the faithful users.

Markets were quick to respond. Those declining users, in tandem weaker than expected ad growth, sent Meta’s stock price plummeting down by more than 25% on Thursday.

Facebook’s inventory of eyeballs has wavered for some time now, with user growth last year slowing to a trickle compared to the company’s glory days. Those figures speak to a larger, more pressing issue anyone spending time on social media inherently knows — Facebook has struggled to attract or retain younger users.

It’s not just Facebook facing problems either. Instagram, one of Meta’s other traditional hotbeds of user growth, has reportedly seen its well of younger adult users begin to dry up. In that case, the platform had hoped to solve this exodus by creating a new version of the app aimed at reeling in younger children, but that has faced stringent pushback from child safety advocates, lawmakers, and just about everybody else. The so-called Instagram for Kids monstrosity is on pause for now.

Facebook vice president of VR Hugo Barra can't contain his excitement about VR. (Photo: Josh Edelson, Getty Images)Facebook vice president of VR Hugo Barra can’t contain his excitement about VR. (Photo: Josh Edelson, Getty Images)

On the surface, the sun still seems to shine brightly on the tech behemoth just recently inducted into the $US1 ($1.4) trillion valuation club, but dig a little deeper and one finds an increasingly rocky foundation. All of these mounting, chronic issues pose potentially serious issues for Meta, which spent a decent chunk of last year trying to convince observers to think of it as a metaverse company. But, even with an outpouring of cash and a spree of metaverse hiring, any meaningful wide-scale adoption of the metaverse is still years away, if it ever happens. Even Meta’s early pitches around the concept make it unclear if the company itself even totally knows which direction it’s headed.

All the while, competitors (most notably TikTok) are eating away at the company’s relevance in social media. Worse still, the effects of Apple’s App Tracking Transparency feature appear to have taken a heavy toll on Facebook and Instagram’s digital advertising empire. For those unfamiliar, Apple launched its anti-tracking feature early last year which sought to give users control over the amount of data that the apps on their phones are allowed to suck up. Apple’s move was met with fierce opposition from Facebook, and for good reason: according to an October report from AppsFlyer about 62% of iOS users had reportedly opted out of tracking. That’s a big deal considering advertising made up around 97% of Meta’s overall revenues last quarter. Chief Operating Officer Sheryl Sandberg spoke directly to these concerns in a recent earnings call.

Shares in the company plummeted 25% in early trading Thursday to around $US243 ($337). The drop cut Meta’s market capitalisation by approximately $US230 ($319) billion, putting it on track for the biggest one-day valuation wipeout in US corporate history.

“Like others in our industry, we’ve faced headwinds as a result of Apple’s iOS changes,” Sandberg said. “As we described last quarter, Apple created two challenges for advertisers. The accuracy of our ads targeting decreased, which increased the cost of driving outcomes.”

Meta CFO Dave Wehner gave a bleaker synopsis and said recent privacy changes made by Apple could cost the company as much as $US10 ($14) billion in 2022.

“We believe the impact of iOS overall is a headwind on our business in 2022,” Wehner said on a call with analysts according to CNBC. “It’s on the order of $US10 ($14) billion, so it’s a pretty significant headwind for our business.”

Making matters even worse, a seemingly invigorated Federal Trade Commission and Department of Justice in the U.S. wary of large acquisitions also threatens to kneecap Meta’s tried and true tradition of throwing cash to kill even remotely competitive companies. Oh, and yeah the FTC is also still in the middle of a major antitrust suit directly affecting Facebook.