For the first time in 18 years, Facebook/Meta has reported a reduction in their daily active user numbers, reporting 1.929 billion for the quarter ended December 2021, compared to 1.930 billion across the previous quarter. This has raised a lot of concern, seeing Meta’s shares drop over 20% overnight, representing over $300bn NZD from their value.
Such was the nervousness around this, that competitors such as Twitter, Snapchat, and Pinterest also saw a drop in their share prices as well. One driver for this is likely Mark Zuckerberg himself, who identified TikTok as one of the main reasons Meta saw their audience number plateau:
The teams are executing quite well and the product is growing very quickly. The thing that is somewhat unique here is that TikTok is so big a competitor already and also continues to grow at quite a fast rate.
Mark Zuckerberg
There were two key issues highlighted that caused enough concern within investors to see this drop in value overnight, one is the static audience numbers, and the other is the reduced forecast in ad revenue.
Meta’s Audience Numbers.
From an audience perspective, Meta has seen increased competition recently, particularly from TikTok. It is, however, important not to lose sight of the fact that Meta’s daily active users (DAU) across all their owned channels is still in excess of 1.9 billion. While this number remained stagnant over the last quarter of 2021, that still represents a huge engaged audience.
Facebook has faced a number of challenges over the years, from making up metric numbers to privacy concerns and legal cases and got through them without experiencing much negative impact. The real threat, though. has always been other social media platforms that offer a unique alternative to Meta’s platforms. However, for all the contenders that have appeared over the years which have seen encouraging numbers of early adopters, but never enough to pose a real challenge.
When you consider that Meta has always taken the approach of ‘if you can’t beat them, buy them; and if you can’t buy them, replicate them’, it can make it even harder for a new player in the market to contend with the established brand. After Facebook’s failed attempt to buy Snapchat, they replicated Snapchat’s offering and created Stories, even staples of Meta’s offerings today, Instagram and WhatsApp, were competitors that threatened to take away market share from Meta before they bought them. Last year, recognising the rise in popularity, Meta introduced Reels, which was designed to compete directly with TikTok.
TikTok’s Role In This
TikTok is an interesting proposition, and one that has seen popularity and usage of the platform grow astronomically since being released. While Facebook was built around familiarity by connecting with friends and what they are doing, Instagram looked to carry this on but also focus on influencers and discovering new things. TikTok has taken a slightly different approach again, being built around algorithms to show users the most popular, trending, and relevant videos for each individual.
Build less on showing what friends are doing, and more on what others are doing around the world. The simplicity of some of the more popular trends (looking at you, random dances), makes replicating, sharing, and being seen even easier. Combine this with a constantly curated environment, TikTok continues to remain engaging and fresh. Add in the fact that TikTok is owned by ByteDance, and there is a lot of funding available to keep the platform evolving with the wants and needs of the user base.
The real question will be around the longevity of TikTok. For some, TikTok is simply just a refreshed version of Vine, without the six second limitation, others see it as a source of content with no substance. But, there is no denying it’s popularity, particularly with a younger audience. The big question is how it will evolve over time to remain relevant and competitive.
The impact of Apple’s privacy policies.
Meta has been very vocal over the last year about the potential impact of Apple’s new privacy policies. Meta has relied heavily on their tracking capabilities around user interaction, and has been pushing this for businesses to help drive acquisitions. When Apple announced that they would allow users to opt out of all tracking, it sent alarm bells within Meta. For a company that has been frequently identified for its questionable user tracking practices, allowing people to prevent Meta from tracking them anymore was a blessing in the eyes of a lot of users.
It’s hard to think of any other medium or platform that has faced as much scrutiny around seeing customised ads. In fact, it almost feels that within the current lexicon, ‘Facebook’ has come to represent the personification of ‘creepy’. Katherine Bindley’s article on The Wall Street Journal in 2019 highlights this:
Facebook still feels pretty creepy at times. You’ll be talking about something, then an ad for that thing will pop up in your news feed or on Instagram. It might be all in our heads. After telling a friend how dusty my apartment was a few weeks ago, I got an ad for an air purifier. What’s the most likely explanation? I noticed the ad because I was complaining about dust? Or Facebook has bugged my apartment?
Katherine Bindley
This is just one example, but I’m sure we have all experienced something similar in the past or spoken to friends who have shared similar anecdotes. By allowing people the ability to quickly and easily block tracking, it also signaled the end of a number of tracking capabilities that advertisers used to drive business results.
Advertiser reluctance due to reduced measurement
With Apple devices representing 45% market share in NZ, and with some reports listing the opt out rate being as high as 62% for iPhone users, there is a large percentage of users who are no longer measurable. This is alarming, but also is reflective of the future we will be living in sooner rather than later, one where privacy comes before all others. This is why Google is deprecating cookies.
Meta has highlighted that this inability to track across the marketing funnel will directly impact those small businesses who use Facebook and Instagram to drive business results, which will no longer be possible or as rich. Solutions like Conversions API (or CAPI) attempt to resolve this drop off, but for a small business it can be an arduous and costly exercise to try and set up CAPI.
For smaller companies it may scare them away, seeing business metrics dropping off, compared to the likes of Google Ads. However, Meta still represents a huge audience, and an opportunity to reach people en masse. This means there will still be a large demand to continue to advertise there, it just may require an adjustment to the understanding of what success looks like regarding reporting and measurement.
How does the metaverse fit into this?
It is going to be interesting to see how the DAU numbers evolve off the back of Facebook’s shift to becoming Meta, and the establishment of the metaverse. It is probably too early to tell how the move to become a hardware company could impact the way people interact with Meta, putting the likes of Oculus at the forefront of the future. If the audience numbers continue to plateau, does this reflect a belief held by those outside of Meta that do not believe the Metaverse and moving towards being a hardware company is what they want from Facebook/Meta?
Conclusion
Meta has faced a number of challenges over the years and somehow continues to grow. While this plateauing of audience numbers could be a sign of people beginning to move away from the platform, or it could be coming from the rise in popularity of the likes of TikTok. It’s hard to say if TikTok will really challenge the likes of Meta long term, however, TikTok does have a lot of financial backing, which most social media start ups usually lack, and a highly engaged audience.
Privacy concerns have led to a big reduction in reporting capabilities, which may scare off some companies that leverage Meta to drive business objectives. With the likes of Google still having some success in reporting these metrics, the shift back to Google might impact the overall advertiser dollars heading towards Meta. But there is no denying there is still a huge audience available within Meta, which it is important should not be ignored off the back of this.