Since its launch nearly two decades ago, Facebook has become a media giant like no other – stretching to every corner of the globe and counting more than half of the entire population as users.
The company’s re-branding to Meta Platforms Inc (NASDAQ:FB) at the end of last year was supposed to be the next step in its evolution. However, a matter of months later and it has been anything but.
In fact, the platform lost half a million active users in the final quarter of 2021 – its first decline in the company’s history.
On top of this, its financial results were so poor that shares fell 25% at one point, wiping $240bn off its market value, triggering a 2% drop in the Nasdaq index.
If the social media giant does not manage to stem the flow of users off of the site soon, would it be unthinkable for Meta (ironically Hebrew for ‘dead’) to pull the plug on Facebook as it shifts its focus to the Metaverse?
The issue of user retention
Since the emergence of the so-called ‘Facebook Papers’ in September of 2021, the organization has been losing active users.
Now the company is facing a stark Gen Z issue.
TikTok is rapidly monopolising users’ attention – particularly among the core demographic of young adults. While the video platform caters perfectly to this crucial group for the advertisers who contribute over 90% of Meta’s revenue, Facebook has been left with an ageing user base.
Therefore, not only does Facebook now need to reconnect with Gen Z users, but it also needs to develop new and innovative ways to monetize the platform that are not already available in the wider market.
Facebook is a platform that has been churning active users for many years from its traditional strongholds, but the pace of new user acquisition from emerging markets did well to mask this from the public.
The stark reality today however means that the seamlessly limitless pool of emerging territories has eventually dried up and the platform’s MAU (monthly active user) losses have now come to the surface and will only start to accelerate over the coming years.
To add to this dilemma, Facebook has also been plagued by a recent series of outages, leaving users unable to communicate.
At the end of the day, Facebook is all about creating habit – if you break that habit, people can easily become disengaged and start doing something else or using other platforms.
Apple & advertising
What’s more, while Facebook is trying to preserve its dwindling (but still valuable) captive audience, the platform is also facing additional challenges since Apple’s removal of IDFA tracking technology.
The introduction of Apple App Tracking Transparency, where iPhone users are now required to provide explicit consent for providing access to these unique identifiers, users have unsurprisingly declined to share this information en-masse.
While other industry giants such as Alphabet were less exposed to the impact of Apple’s privacy changes and removal of IDFA, Meta has been left grasping for a lifeline.
IDFA was a hugely important device identifier to platforms like Facebook and its removal has fundamentally impacted the efficacy of marketing iOS apps on the platform.
This has led to substantial iOS advertising revenue moving away from Facebook and towards Apple’s own Apple Search Ads platform.
In fact, Facebook said it now expects to lose “in the order of US$10bn” this year in missed advertising revenue alone.
Pressure from Europe
To add to the pressure Facebook is already facing, Meta could soon find itself unable to transfer data between Europe and the US – a reality that could see Facebook shut down across Europe.
Previously, Facebook has relied on ‘Privacy Shield’ and ‘Standard Contractual Clauses’ to regulate how data is transferred between different regions.
However, the primary was invalidated in July 2020 and the latter has been openly criticised by regulators.
Now, Meta has hinted that unless a new framework is introduced that supports data transfer between the two regions, its operations will have to be reconsidered entirely.
READ: EU working out how to regulate the metaverse
The arrival of the Metaverse was unveiled by founder Mark Zuckerberg with such fanfare and was meant to lay the foundations for the evolution of the business.
However, while it may show promise in years to come, in its current format it appears half-baked, and by all accounts rushed out to help cover some of the cracks in Meta/Facebook’s once-bulletproof armour.
If Meta and/or Facebook is to survive for the foreseeable future, changes will need to be swift.
These need to start from a top level. Zuckerberg’s leadership has come under such scrutiny in the past few years, it would make sense for the founder to step down to give a new wave of digital innovators a chance to rebrand and re-innovate Meta’s offering.
In my view, the only way out of this for Meta is further growth-through-acquisition, and that is a finite path.
Looking ahead
Facebook is undoubtedly fighting an uphill battle, and one that it is unlikely to win. Whilst the newly re-branded Meta will be around in twenty years, it is more likely to be a tech acquisition hub buying companies in order to grow.
If Facebook is to remain, it now needs to address the impending governmental regulation across the globe.
This inherently requires greater transparency and, most importantly, relinquishing some control. Even if the company manages to achieve this, it’s highly likely Facebook will be a tiny shadow of its former self.
Back in 2004, Facebook was an innovator with competitors few and far between.
Fast forward to today, the sector is saturated and a strong market position is no longer a guarantee.
The key thing Facebook has lost over the past five years is public support. At the end of the day, once this is gone, it is extremely hard to crawl back.
Ultimately, without a thriving user base, and with market competitors such as TikTok hot on their heels, Facebook will be all but dead in the water.
Mike Rhodes is CEO of ConsultMyApp, a leading global app marketing company, which has been instrumental in driving the digital evolution of some of world’s top brands – including Pure Gym, Virgin Media, O2, Tide, The Trainline and Deliveroo.