• Chris Bowler

Is Facebook doing a faceplant?

Updated: Nov 2, 2018

The social network reported earnings this week and the signs are not good.

This week, Facebook reported Q3 earnings. According to Business Insider:

Facebook's daily users in the US — its most valuable market — flatlined at 185 million during the three months ended September 30, the same level as at the end of Q2.
Not long ago such a lack of growth would have been considered a big cause for concern among Facebook investors. But in a sign of how low the expectations have become, investors celebrated the fact a feared user exodus did not materialize.

Apparently, investors were relieved that users, especially in the U.S. market, did not leave in droves despite the controversies faced recently by the social network - namely, privacy concerns, reports of election manipulation and a security breach that exposed the personal information of approximately 14 million users.


The real problem here is not that Facebook's user base has merely stayed steady, it's that it appears stalled from a growth perspective. In today's ever-changing social media landscape, that can mean big trouble, as users may jump to other platforms, or decide to shift social behavior altogether.


Even though the daily usage rate at 185 million flatlined, better news came in that monthly active users increased slightly in Q3 overall, especially in the crucial U.S./Canada/Europe markets.


While the floor appears to be solid, a few key takeaways should keep marketers wary of the future of Facebook:

  • A growth rate of just over 1% shows that Facebook is less like a fast-moving gazelle and more like a plodding elephant. It might be obvious given the size of Facebook, but the lack of growth indicates a stagnating position.

  • The focus on privacy and policing Facebook's content has clearly taken the attention away from other areas, namely investing in innovative user experences and new products for it's maturing platform. It's certainly commendable that Facebook priortizes this needed action, but the diversion risk remains. Marketers should take note.

  • Mark Zuckerberg, CEO and founder of Facebook, emphasized the shift in strategy away from 'feeds' to the increasing direction of 'stories'. That sounds more like a copy-cat strategy akin to the success that Snapchat has generated, although it's far from clear whether users really like content that disappears almost immediately, or, in some cases, may linger for just 24 hours.

What can we expect from Facebook in the coming weeks and months? For starters, holding steady in user activity - without an innovation pipeline (presumably) - will likely result in lower numbers going forward. Yes, the demise of Facebook has always been predicted (inaccurately, in our view), but it's not unreasonable to expect a fall-off. When that happens, real panic will set in. Marketers and their agencies will still spend advertising dollars, of course, but the search for alternatives will begin, even if today there are no obvious benefactors.


Facebook will likely to continue to monitize Instagram, which now accounts for a sizeable portion of its advertising revenue (remember when it was zero?). But it will be tough given that two Instagram co-founders have announced their departure.


Of course, Facebook can continue to invest in (or squeeze) it's WhatsApp Messenger platform, but so far, this strategy has not yet materialized.


I'd expect Facebook may try a bigger move, such as an acquisition target. It may make sense to make an ecommerce play to better compete with Amazon. Or, alternatively, if Facebook sees itself as an entertainment platform (ie video), could it consider a Netflix or Hulu purchase?


In any case, interesting times in the world of the Book of Face.


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Chicago, Illinois

T: 312-282-7193​

 

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