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Posted on 13 Feb 2018 by Steve Johnson

Fragmenting Social Media and Facebook’s Withering Popularity

Fragmenting Social Media and Facebook’s Withering Popularity

 

Fair enough. I haven’t used it for years. And I don’t like it. Which means I’m predisposed to seeing signs of decline when they don’t exist.

But Facebook’s latest results at least give me some evidence to work with.

For the past few years I have been seeing lots of anecdotal evidence that less and less people are using Facebook, the world’s big daddy of social networks. Its results for the fourth quarter suggest that my anecdotal evidence is suggestive of a wider trend.

Daily active users in the USA and Canada, Facebook’s most mature market, declined for the first time in Facebook’s history. Time spent on the site was down by an average of 50 million minutes per day. That’s not much, given more than 1.4bn users a day, but it is a decline nonetheless.

Fragmenting Social Media and Facebook’s Withering Popularity

The question is whether this data is a blip or a sign of decline in this wonderful business. Mark Zuckerberg, founder and CEO, suggested changes made to the news feed to “show fewer viral videos to make sure people’s time is well spent” were at least partly to blame.

Facebook investors have a few things to worry about.

Tiring of the #fakenews

One is that people simply get tired of it. That has been the main reason cited amongst my small sample of leavers, ranging from teenagers to the middle aged. They are sick of it, bored of it and have realised they are wasting a significant part of their life and making themselves feel crap for the trouble.

Two is that social media is fragmenting. Instead of one giant social network, people seem to want silos. Strava for exercise, Instagram for photos, Tinybeans for baby photos, Linkedin for professionals and Bumble for …. well … I’ll let you look that one up.

Facebook and Google have taken 80% of all online advertising growth in recent years, but advertisers are finally waking up to the fact that users are spending their time elsewhere. Share prices of both Twitter and Snapchat rocketed last week on rapidly growing advertising revenues.

Why should they make all the profit?

And then there is the potential for growing distrust and resentment to turn into regulatory problems. One interesting potential application of blockchain is to allow people to safely own and store their online data. Say what you will about Bitcoin, nobody has been able to hack it despite the billions of dollars of reward on offer.

Imagine if, instead of storing all of your data on Facebook’s servers, you store it on your own blockchain and allow Facebook the sections of your data they need. You could get paid for the advertising dollars you generate. And the day you decide to leave, the data goes with you (I pinched this idea from an excellent artice, Beyond the Bitcoin Bubble by a much smarter Steven Johnson).

Most people don’t care enough to deal with the hassle. But in aggressive consumer protection jurisdictions like the European Union, governments might force the issue.

Don’t lose too much sleep

Still, the reality is that for now the overall business continues to grow. Compared with a year ago, the number of active users worldwide grew 14% in the fourth quarter. And the revenue generated per user grew 28%.

Fragmenting Social Media and Facebook’s Withering Popularity

The average remains a small fraction of the $26 per user generated in North America, suggesting that the rest of the world can grow a lot further from here.

You would be braver than me to bet against it. For the first time in Facebook’s history, though, there are signs that its fortress might not be impregnable.

 

Fragmenting Social Media and Facebook’s Withering Popularity
Fragmenting Social Media and Facebook’s Withering Popularity  Fragmenting Social Media and Facebook’s Withering Popularity  Fragmenting Social Media and Facebook’s Withering Popularity  Fragmenting Social Media and Facebook’s Withering Popularity

5 thoughts on “Fragmenting Social Media and Facebook’s Withering Popularity

  1. Facebook has been great at not trying to be all things to all people and making the right acquisitions at the right times. When google or Apple try to build it to compete Facebook will happily buy someone and integrate. The Instagram acquisition was genius as Facebook began to see declining use amongst young people. who says Facebook won’t buy Strava to target people in the fitness part of their life or Tinybeans for the kids part of their life? Surely they’ve got the cash for these sorts of acquisitions when they think the time is right. The users of the apps don’t care as Facebook doesn’t try to force unwanted integration and advertisers would love it as it further allows them to target the optimal users.

    • If political & regulatory sentiment turns against Facebook, opposition to these sorts of acquisitions could grow. I don’t think Facebook should have been allowed to buy Instagram and Whatsapp.

      I agree with Steve Johnson’s (there seem to be a lot of Steves around here) thesis here. It’s still early days, but there are some cracks appearing. Social media is still a very new phenomenon. At first people plunged in head first and became addicted, but only fairly recently is the (accurate) social meme that social media is harmful to people in many ways starting to gain wider spread acceptance.

      It will start with people turning off F/B notifications etc, but could accelerate. The network effect cuts both ways. The less people use facebook, and the less actively, the less reason people have to come by and visit regularly. A collapse in usership is still a remote possibility, but all the big returns (gains and losses) in markets are in the tails, not the fat part of the probability distribution. FB is prices for decades of continuing dominance and (slowing) growth and its US$0.5tr valuation is very vulnerable if an unexpected curve in the road presents itself.

      Already, user growth is not too far away from peaking (and the incremental users being added are lower-value users in developing countries), and their ad load is also already quite high. If ad load is increased much further, it will provide another reason for users to tune out.

      Generally speaking I think you should bet on continuing human frailty. In a perfect world people would learn that casino gambling is a bad idea and stop going, but the punters never seem to. Addiction is a powerful thing. However, it has limits. Sugar consumption is dropping in many developed markets now, for instance. Smoking has also declined a lot (albeit partly for regulatory/taxation reasons). The inevitability of F/B’s continuing dominance is not assured, imo.

      Thanks for the great posts Steve.

      • Agree with you on the regularly sentiment… to date the US regulator hasn’t treated tech acquisitions as ‘real’ acquisitions the same way as they would with big financials, media or retailers. Surely this is due to change once they begin to realize that 2 companies control most of the world’s advertising revenue. You’re right about only so much advertising space being available through the news feed before the user experience is adversely affected… this will mean prices will go up and only the biggest companies will be able to afford to advertise, further adding to the anti competitive sentiment

        But whilst Zucks cops a bad rap he’s a sharp operator with the right people around him. He’s faced these threats before and come through the other side stronger. Eventually facebook’s downfall may be due to his motivations being more aligned to changing the world for the better rather than generating profit and whilst this might make him a great human is a red flag to investing in Facebook.

        • Agree. Zuck appears to now appreciate some of the unintended negative consequences FB has caused, including facilitating the fake news epidemic. He is taking some responsible, remeditating actions in response. They may be bad for FB commercially, and Zuck will know this, but he might choose to do it anyway. He doesn’t strike me as someone unhealthily greedy or lustful for power. This is indeed the ‘right thing to do’, so Zuck can’t be criticised, but FB stock will still go down.

  2. Read some interesting statistics recently which said that most fake news articles are forwarded on by bored pensioners sitting behind their computers all day all night. My aim is not to become a bored pensioner so could not really care less about Facebook.

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