The factors plaguing Facebook and Meta over the past few years have reared their heads.
On 3 February 2022, Meta, the parent company of Facebook, made headlines when its stock plummeted more than 26%, erasing more than US$232 billion from its market value. This marked the biggest single-day slide in value for a U.S. company, topping the prior record set by Apple, when it lost around US$182 billion in September 2020.
The plunge saw Meta chief executive Mark Zuckerberg lose around US$3 billion in personal net worth, making it the second-largest single-day loss ever after Tesla CEO Elon Musk’s loss of US$35 billion in November last year.
Many investors fled the company after it forecast weaker-than-expected revenue growth in the following quarter, saying it expected first-quarter revenue in the range of US$27-29 billion when analysts were expecting US$30.15 billion. Facebook also saw its user numbers drop for the first time in its 18-year history last quarter, falling by about half a million active users every day. The company said Apple’s iPhone privacy changes and increased competition were to blame.
Privacy changes by Apple
Apple’s privacy changes to the iPhone operating system (iOS) require apps, such as Facebook, to ask users for explicit permission to track their activities “across other companies’ apps and websites”. Apple believes that their “users should know when their data is being collected and shared across other apps and websites—and they should have the choice to allow that or not.”
Apple first introduced the App Tracking Transparency (ATT) feature last year in iOS 14.5, which was released for iPhones in 2021. It is also included in iOS 15, which is running on the large majority of modern iPhones. The feature reduces targeting capabilities by limiting advertisers from accessing an iPhone user identifier.
The ATT feature consists of popups that ask Apple users whether they want to be tracked and have their data collected when opening a certain app. If the user declines, the app developer can no longer access the Identifier for Advertisers (IDFA), a device ID that is used to target and measure the effectiveness of online advertisements.
Around 96% of Apple users have chosen to opt-out of sharing their IDFA, which translates into less user data for app platforms. This spells disaster for companies, such as Facebook, whose market advantages and revenue streams are built on leveraging users’ data to target the most effective advertisements for those users.
“We believe the impact of iOS overall is a headwind on our business in 2022,” said Meta Chief Financial Officer Dave Wehner. “It’s on the order of $10 billion, so it’s a pretty significant headwind for our business.”
New competitor – TikTok
Facebook also faced unprecedented competition from newer, hipper social media applications, like TikTok, which are siphoning Facebook users from the younger generations. Zuckerberg said, “People have a lot of choices for how they want to spend their time and apps like TikTok are growing very quickly.”
Zuckerberg hopes to focus on developing Instagram Reels, a new way for users to create and discover short, entertaining vertical videos on Instagram. It is a direct competitor to TikTok.
In 2018, after merging with Musical.ly, a Chinese social media service allowing users to create and share short lip-sync videos, TikTok became Facebook’s biggest competitor. It has made it easier for people to make compelling videos and get famous overnight from them. It is also a hub for audio memes, special effects and community in-jokes that have gone viral.
In the following months and years, Meta is going to play catch-up, or user attention is going to completely shift to greener grass.
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