Facebook’s subscriptions dropped by 1 million, from 1.93 billion to 1.929 billion and it lost a whopping $230 billion in one day, the biggest in history. Ouch.
Just 1 million, out of a total of about 24% of the global population of 7.9 billion. And the market hammered Facebook, now trying to hide from its shame with a rebranding as Meta Platforms.
Facebook – this is a column where we call a spade a vertical earth-moving technology innovation – is in big trouble, at last. This 26% plummet for what seems like a seemingly small drop in subscriber numbers, is the conclusion of years of bad corporate governance catching up with it. Zuckerberg’s personal fortune also took a $30 billion hit
This is significant for many reasons. It’s Facebook’s first fall in subscriber numbers, which is always a sure sign of trouble for any business that enters this phase. Secondly, it is an evidence-based demonstration that growth has peaked – albeit a small number – but people can tell when the end is nigh, as it were.
The real concern is that Facebook hasn’t been able to deal with two major market changes that deeply affect its business. The first is it’s waning popularity (and of Instagram) with the youth market, which prefers TikTok; while the second is the knock-on effects of Apple’s widely publicised privacy feature App Tracking Transparency (ATT) last year.
Facebook is expecting to lose $10 billion in revenue because of ATT, it warned last week.
“We believe the impact of iOS overall is a headwind on our business in 2022,” said Meta CFO Dave Wehner. “It’s on the order of $10 billion, so it’s a pretty significant headwind for our business.”
It could be worse, because it’s only a guess, he adds. “We can’t be precise on this. It’s an estimate.”
Said to analysts on a call, this is corporate double-speak for “we’re frakked and we don’t know how bad yet”.
No wonder the market panicked. Facebook is in real trouble – its busines growth is stalling, its big bet of the future – it’s version of the Metaverse – is a $10 billion gamble that is years away from being ready.
Meanwhile, with an innovation strategy defined by Zuckerberg in a 2008 email – “It is better to buy than compete” – Facebook can’t buy its way out of this problem. With the newly energised Federal Trade Commission and seemingly all of the US States attorneys general pushing for a breakup – and the off-loading of WhatsApp and Instagram – Facebook is forced to be creative on its own.
This is not always its strongest suit given how it is known for ham-handedly shoplifting ideas from others. When it was threatened by the then emergent Snapchat, Instagram copied its features. Now that TikTok’s short-form video is the ascendency, Instagram has a new Reels clone-like feature.
This is the end of the beginning, and the real start of the meaty middle. This is a company with a management that has proved to be isolated and out-of-touch with reality (think Zuckerberg’s “crazy idea” initial comment on the 2016 Cambridge Analytica revelations) and has consistently failed to deal with its misinformation and hate-speech problems. Zuckerberg has no other strategy in his limited playbook – apart from buying the competition – and its shows.
This article first appeared in the Financial Mail.