Facebook has a Tiktok problem: The world’s largest online network Facebook hardly gained any new users in the past quarter. The number of daily active members even dropped by around one million within three months. In terms of monthly activity, there was a meager increase of two million by Facebook standards.
Together with the disappointment about the sales forecast for the current quarter, the numbers drove investors to flee: The shares of the umbrella company Meta lost almost 23 percent in a spectacular fall in after-hours trading on Wednesday.
Founder and boss Mark Zuckerberg expressly referred to competition from the video app Tiktok, among others. “People have tons of choices about how to spend their time – and apps like Tiktok are growing very fast” he said in a conference call with analysts. The 37-year-old stated the company’s goal for his platform to focus even more on short videos from now on.
Facebook sees the future in reels
The company developed its own Tiktok competitor Reels for this purpose. The new focus will initially put pressure on the proceeds, admitted Zuckerberg. Because Reels ads are less lucrative than, for example, the space in the user’s news feed. But this is the right step for the platform in the long run.
The abrupt activity brake hit all areas. A drop in daily active users from 1.93 billion to 1.929 billion may not seem like a big deal. But in the previous quarter, the value had increased by 22 million – and in the second quarter of 2021 the user base grew by 30 million. Facebook also missed analysts’ expectations of 1.95 billion daily active users.
Only slight increase in user numbers for Whatsapp and Instagram
The Facebook company Meta also counts how many users use at least one of its apps – including Whatsapp and Instagram. With an increase of 10 million to 2.82 billion daily, growth was unusually low here too. In the previous quarter, 50 million had been added.
In the corona pandemic, Facebook spoiled investors with lavish growth rates. Therefore, the forecast of 27 to 29 billion US dollars in sales in the current quarter hit particularly hard. Because it means that year-over-year revenue will grow by maybe just 3 percent.
Facebook blames Apple for drop in sales
As justification, the company once again referred to Apple’s measures for more privacy on the iPhone, which have been slowing down Facebook business for months. Meta expects this to knock sales by $10 billion this year, said CFO Dave Wehner.
App providers like Facebook have had to ask iPhone users since last year if they can track their behavior across different services and websites for advertising purposes. Very many iPhone owners rejected this.
This makes it harder for Facebook to tailor ads to individual users. However, the company’s central business model is to show ads exactly to the target groups desired by advertisers. With iPhone users saying no to tracking, it became more difficult for the company to both collect information about user interests and measure the success of advertising campaigns.
Will Facebook take action against Apple?
The words of the chief financial officer also gave the impression that Meta was investigating a complaint alleging unfair competition. The restrictions are tailored to apps, while in the web browser, for example, search engines still have access to more information for the personalization of advertising, Wehner criticized.
“We think Google’s search ads business may have benefited compared to services like ours,” he said. And the billions that Apple gets from Google each year are an incentive to continue this “discrepancy . ” Google pays to be the default search engine in Apple’s Safari web browser. Users can change the search engine at any time.
This is how Facebook stands on virtual reality
Meta also released more detailed figures on its virtual reality business for the first time. Over time, this should create the digital world Metaverse, in which Zuckerberg sees the distant future of the company. In the most recent quarter, Reality Labs revenue increased to $837 million from $717 million year over year.
At the same time, the operating loss rose from around 2.1 to 3.3 billion US dollars. Over the past year, the division accumulated red numbers of more than 10 billion US dollars, including for research and development. CFO Wehner promised that spending would continue to rise this year.
Revenue, meanwhile, grew by a fifth year over year to nearly $33.7 billion in the most recent quarter. The bottom line is that profits fell by eight percent to almost 10.3 billion US dollars.