Could Facebook be dead in the water? By benjamin

© Reuters Could Facebook be dead in the water?

By Mike Rhodes, CEO of ConsultMyApp

Since its launch nearly two decades ago, Facebook (NASDAQ: NASDAQ:) has grown into a media giant like no other – spanning every corner of the globe and counting more than half of the total population as users. The company’s rebranding to Meta late last year was supposed to be the next step in its evolution. However, a few months later it was anything but.

In fact, the platform lost half a million active users in Q4 2021 – its first drop in company history. On top of that, its financial results were so poor that shares fell 25% at one point, wiping $240 billion off its market value, triggering a 2% drop in the .;

If the social media giant fails to quickly stem the flow of users off the site, Meta (ironically Hebrew for “death”) may well decide to unplug Facebook as it focuses on the metaverse.

The question of user retention Since the emergence of the so-called “Facebook Papers” in September 2021, the organization has been losing active users. Now they face a serious Gen Z problem. TikTok is quickly hogging user attention, especially among the core demographic of young adults. While the video platform caters perfectly to this crucial group for advertisers who contribute over 90% of Meta’s revenue, Facebook finds itself with an aging user base. Therefore, not only does Facebook now need to reconnect with Gen Z users, but it also needs to develop new, innovative ways to monetize the platform that aren’t already available in the broader marketplace.

Facebook is a platform that has attracted active users from its traditional strongholds for many years, but the pace of new user acquisition in emerging markets has done well to mask this from the public. Today’s harsh reality, however, means that the limitless pool of emerging territories has finally dried up and the platform’s MAU (monthly active user) losses have now surfaced and will only begin to mount. accelerate over the next few years.

To add to this dilemma, Facebook has also been plagued by a recent series of outages, preventing users from communicating. Ultimately, Facebook is about creating a habit – if you break that habit, people can easily disengage and start doing something else or using other platforms.

Apple (NASDAQ:) and advertising In addition to trying to preserve its dwindling (but still valuable) captive audience, Facebook has also faced additional challenges since the removal of the IDFA and the introduction of tracking transparency. Apple apps. As part of Apple’s “App Tracking Transparency” feature, iPhone users are now required to provide explicit consent to provide access to these unique identifiers. Unsurprisingly, users refused to share this information en masse.

While other industry giants such as Alphabet (NASDAQ:) were less exposed to the impact of Apple’s privacy changes and IDFA removal, Meta found itself grabbing a lifeline. safety. The removal of such an important device identifier had a fundamental impact on the effectiveness of iOS app marketing on the platform. This led to Facebook’s substantial iOS ad revenue shifting to Apple’s own Apple Search Ads platform. In fact, Facebook is now expected to lose $10 billion this year in lost ad revenue alone.

The Europe Question To add to the pressure Facebook is already facing, Meta may soon find itself unable to transfer data between Europe and the United States – a reality that could lead to the shutdown of Facebook. in the entire Europe.

Previously, Facebook relied on the “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 primary was openly criticized 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 completely reconsidered.

The arrival of the Metaverse The arrival of the Metaverse was unveiled with great fanfare and was to lay the foundations for the company’s evolution. However, while it may show promise in the years to come, in its current format it looks half-baked and by all accounts rushed to help cover some of the cracks in the armor formerly bulletproof from Meta/Facebook.

If Meta and/or Facebook are to survive for the foreseeable future, the changes will have to be rapid. These must start at a higher level. Zuckerberg’s leadership has come under such intense scrutiny over the past few years, it would make sense for the founder to step aside to give a new wave of digital innovators a chance to rebrand and reinnovate the offering of Meta. In my opinion, the only way out for Meta is further growth through acquisition, and that’s a finite path.

Looking ahead, Facebook is undoubtedly fighting an uphill battle, and it’s unlikely to win. While the newly renamed Meta will be around twenty years from now, it’s more likely to be a tech acquisition center buying companies to expand.

If Facebook is to stay, it must now deal with impending government regulation across the globe. This inherently requires greater transparency and, above all, the surrender of some control. Even if the company manages to achieve this, it is very likely that Facebook will be only a small shadow of itself.

In 2004, Facebook was an innovator with few competitors. Fast forward to today, the industry is saturated and a strong market position is no longer a guarantee. The main thing Facebook has lost in the past five years is public support. At the end of the day, once that’s gone, it’s extremely difficult to go back. Ultimately, without a thriving user base and with market competitors like TikTok hot on their heels, Facebook will be pretty much dead in the water.

Mike Rhodes is CEO of ConsultMyApp, a leading global app marketing company, which has been instrumental in the digital evolution of some of the world’s biggest brands including Pure Gym, Virgin Media, O2, Tide, The Trainline and Deliveroo.

© 2022 Benzinga does not provide investment advice. All rights reserved.

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