Is the Facebook user dip a blip or the acceleration of an ongoing trend?

Last week’s news that Facebook’s daily active user base fell for the first time since parent company Meta started reporting usage figures was met with speculation around how the platform can keep itself relevant amid intense competition elsewhere and policy changes in how advertisers can track users. 

Pressing the panic button?

The reaction of the US stock market meant shares in parent company Meta crashed by a quarter in what was termed ‘the biggest one day loss’ for a US company in history. This may be a bit of a ‘panic button’ reaction to a slight acceleration of already slowing growth. 

However, uncertainty around future data transfer laws has meant Meta threatening in its annual report that it may not be able to offer Facebook and Instagram in Europe if data can’t be transferred to the US. This is on top of Apple - and others - already banning the use of third party cookies, with Google set to follow next year - and the consistent competition from other apps and platforms in an era where Meta is investing vast sums in its ‘metaverse’. 

Meta and Facebook Q4 2021 - the numbers

Taking the numbers at face value, Meta’s Q4 2021 Earning Presentation reported that:

• Facebook’s daily active users stood at 1.929 billion in Q4, compared to 1.93 billion in Q3 2021;

• Daily active users for Q4 last year were still 4.6 percent up on Q4 2020;

• Meta’s advertising revenues were up in Q4 2021 - at $32.6billion - compared to the $28.3billion the previous quarter and were just over 20 percent higher than Q4 2020; and;

Growth in daily active users by quarter (2014 to 2021)

In the corresponding earnings call last week, Meta warned of ‘headwinds’ that could affect the quarter and year ahead, having already shown signs of stalling growth. COO Sheryl Sandford said that 2021’s solid growth was seen to continue in Q4, but factors affected the quarter, including competition and the business’s move to short-form video through Instagram Reels, acknowledged to be monetising at a slower rate than News Feed or Instagram Stories.

“We were lapping a period of strong demand in 2020 that benefited from very strong growth in online commerce, which has since slowed. Q4 was also the first holiday season after Apple’s iOS changes, which have had an impact on businesses of all sizes – especially small businesses who rely on digital advertising to grow. This will continue to be a factor in 2022.” 

Performance Marketing World reached out to industry commentators to get their thoughts on how the competitive space and tracking transparency changes may affect the company’s next moves.

Do the ‘cool kids’ still use Facebook?

Competition from other media platforms - principally Tik Tok - has been a standout callout as one of the challenges Facebook - and Meta across the board - has to overcome, with questions around whether such competitors are eating away at Facebook’s relevance. 

Ozgur Taskaya, CMO, BcnMonetize says: “Companies compete for people's attention in today's attention economy. In the past, Meta has won this race, but lately we've seen significant shifts due to other rising platforms like TikTok. In response, Meta introduced Reels and as expected, Instagram attention shifted from Story and Feed to Reels. However, Reels are not monetised as well as Stories or Feed and so this will have been reflected in the share price.”

Competition among apps and social media platforms may in itself seem a bit obvious, but the crucial point to note is the consumer behaviour of Gen Z and what keeps this user group interested.   

Sam O’Brien, CMO of performance marketing platform affise, points out that “social media is becoming more and more competitive by the day, and in 2022 we expect there to be 3.96 billion social media users worldwide, a 4.8 per cent increase from 2021”.

“It is important Facebook keeps themselves in a leading position and really utilises different elements upon the platform that will keep those Gen-Z users hooked.”

Apple changes and the effects 

Another significant factor in Meta’s challenges is Apple’s AppTracking Transparency framework - or the ban on third-party cookies. The move by Apple - and Mozilla and Microsoft – to ban cookies which track internet activity may have been perhaps more sharply felt slightly earlier than expected, but it does enforce the view of a sign of things to come particularly when Google acts on its promise to ban third party cookies by next year.   

Neil Smith, VP Americas, 1plusX comments: “Meta’s declining share price, driven in part by advertising performance, demonstrates that major advertising players are not immune to policy changes – whether they’re made by Apple or any other impacting the ability to target users. 

“Sophisticated media companies understand that the advertising ecosystem is quickly evolving and the business risks that it represents. As a result, they’re implementing strategies that improve their ability to target users in a privacy-compliant way – making use of first party data enrichment and audience expansion capabilities that allow targeting even when user identity signals are not available.”

BcnMonetize’s Taskaya adds: “Targeting is Meta's bread and butter and they used to do it very well, which made them very attractive to advertisers. With this significant decline in targeting capabilities, those advertisers are now not yielding the same results. All of these factors will make Meta struggle to gain market share in advertising. Nevertheless, being the largest player building a metaverse and owning the Oculus brand should give them an edge.”

Next steps for Meta - and Facebook

There’s challenges ahead for Meta and clearly the dip in active users marks a historic dent in the company’s growth story. But it’s faced competition before and one quarter’s results does not spell a downward spiral for anyone. Really we should keep a watchful eye over the next six to nine months to assess the longer term metrics more stringently.

Some acknowledge that the results may - if not already have - triggered a bit of a ‘wake up call’ about certain changes Meta needs to make, and that it has ‘kept up’ before. 

Tug’s head of paid media Asher Gordon pointed out that Meta has been seen to “borrow features from competitors to attract and engage users” in the past, making it likely that it’s already planning the next move to keep up with Tik Tok and others. 

Gordon says: “This news might also be the wake up call Meta needs to make wholesale changes. For example, by becoming more user-centric and privacy-conscious, it can appeal more favourably to the public and boost its bottom line. Ultimately, although a 500,000 decrease in log-ins is a massive number, it’s only a small percentage of the tech giant's extensive user base. 

“It will be important to assess how this looks over time, but it’s clear Meta shouldn’t be written off just yet."