Trouble in Paradise: Facebook's woes deepen

Facebook is in trouble. The US tech giant on Wednesday reported a fall in daily users for the first time in its 18-year-old existence. Meta, the new name for the company that owns Facebook, said the users that logged in on site daily fell to 1.929 billion in Oct-Dec 2021 from 1.930 billion in the previous quarter.

The drop while seemingly small (about a million users) led to investors exiting, leading to a 26 per cent drop in stock prices and loss of over $230 billion of market value, reportedly the highest single-day loss for a US company ever. As for Meta chief Mark Zuckerberg, the billionaire lost as much wealth as the gross domestic product of Estonia.

What's happening at the social network?

The company's dismal earnings and the drop in users come as a warning for Facebook. It is struggling to retain users and compete with fast-growing platforms like Tiktok. The tech giant also cited Apple's new privacy update as a major laggard to its advertising strategy, blaming the iPhone-maker for the loss of about $10 billion.

In India, Facebook blamed the steep rise in internet data charges for its poor performance in terms of user growth. The telecom services had hiked the prices by as much as 25 per cent in November last year.

The company is also in a massive transition phase; moving from a social networking platform to a virtual world of the metaverse, the root of its rechristened name.

However, experts have doubted the potential of the all virtual world in which users can move around freely in an augmented world. Adoption of augmented reality is still a fantasy of few fans and a quick large-scale expansion, even if possible, is unlikely in emerging markets like India, where Facebook boasts 350 million users. But, Zuckerberg is pouring billions into development of this technology that is understood by few, making metaverse the long game for the company. Of Meta's total revenue of $33.67 billion, the virtual and augmented reality wing accounted for mere $877 million.

Also read: How Facebook slipped -- in key points

Road ahead

A couple of years ago, Facebook's growth had no roof to be trapped under, however, the latest revelation shows that the social network has reached a saturation point. Many fear that Instagram is also likely to head in the same direction as Facebook.

Instagram too is facing fierce competition from rivals like TikTok, which has emerged as highly addictive platform with over a billion users now. The Bytedance-owned app is also increasing its user base rapidly. Instagram Reels, the app's feature clone of the Chinese app, has a lot riding on it to keep the momentum going. Experts say the drop in Facebook gains would also mean Meta may look towards its other platforms like WhatsApp to make money.

Also Read | Zuckerberg loses $29 billion in a day as Meta shares crash

Data woes

Apple tightening its privacy policy means its users can now restrict Facebook from accessing their data, which is used by the platform to deliver targeted ads. We now know that if ads shown to users are unspecific, their impact is cut significantly. Thus, Meta is losing clients to its competitor Google, which has reported record earnings, particularly in the ecommerce search.

Facebook has also come under regulatory crackdown in various parts of the world with governments investigating if Meta acted in a way that made little room for competition. Earlier, the giant acquired other platforms with little ease, but their recent purchases have come under scrutiny. On Friday alone, Britain's competition regulator said it had fined Meta 1.5 million pounds ($2 million) over fresh issues regarding its purchase of Giphy.

(with inputs from agencies)

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