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No Easy Solution to Meta Crash as Teens Log Out of Facebook

Facebook’s user base shrunk for the first time in its 18-year history, with half a million users logging out in the last three months of 2021. For a company obsessed with growth, Facebook grew from 1 billion monthly active users in 2012 to 2 billion by 2017 – a slowdown was inevitable, but it’s unclear where the next generation of users will come from.

It’s not the first time Facebook has been challenged by a competing platform, or even a new content format, but it was utterly unprepared for the fast-paced short videos and aggressive algorithms of Chinese-owned TikTok. ByteDance. Last year, the video platform became the first non-Facebook app to be downloaded more than three billion times, and analytics firm Apptopia dubbed it the most popular app of 2021.

TikTok isn’t all that different from other social media, filled with paid product recommendations, web celebrities, and viral trends, but it’s all about short video clips. As users browse through them, the algorithm learns their interests and uses them to deliver increasingly engaging videos. One person can get lots of videos of quaint houses being built in the forests, and another can get cheap recipe ‘hacks’, but they can both get the latest comedy dance trend.

TikTok has many imitators, including new offerings from Google, Snap, and Meta itself, but none have managed to become as engaging. A central problem with these bolt-on imitators, like Facebook’s Reels, is that even if they become popular, the format doesn’t allow for the kind of ad revenue of traditional News Feed.

They don’t feel as natural. “I personally will create a TikTok and then repost it on Instagram Reels, like the exact same video,” Cao says.

No wonder then that Meta Founder and CEO Mark Zuckerberg is so passionate about the virtual world of the Metaverse. Real life isn’t much fun when you see $31 billion ($43 billion) go up in smoke in one session.

Facebook’s big bet on the Metaverse is spooking investors.Credit:Bloomberg

But the Metaverse, which Facebook spent $10 billion on last year, is also crucial to the company’s future. Having lost a generation of users to TikTok, Zuckerberg hopes his version of virtual reality will attract a whole new group of younger users.

It’s a bet that will likely drain billions of dollars from Meta’s coffers and there’s no guarantee of success. Virtual reality is still a long way from mainstream, the overall appeal of the metaverse remains doubtful, and there’s still a lot of work to do before it’s remotely close to being a mainstream product.

Meta has the money to build Zuckerberg’s metaverse, but the company’s data-intensive ad engine, its primary source of income, has also run into trouble due to privacy changes implemented last year by Apple.

The iPhone maker, as part of greater user privacy, stopped allowing apps like Facebook to set their own rules when it came to obtaining consent for data tracking.

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Since June last year, iPhone users have been getting a prompt when they first open Facebook asking if they want to be followed by Facebook on the web and other apps. If they say no, and most people do, their use of Facebook is much less attractive to advertisers. Media buyers can no longer reliably see how many sales a campaign is generating for example, and Facebook is losing the ability to target specific users for ads.

With competitors stealing users and limits on its ability to mine existing customer data, Meta can’t get out of trouble either, given how few friends it has in regulatory circles.

If anything, Meta’s monopoly status not only means it’s barred from other social networking sites, but every acquisition it contemplates – from makers of virtual reality headsets to game software developers – will subject to rigorous scrutiny.

But with travel and normal life resuming with pandemic restrictions ebbing, Cao wonders if TikTok’s day in the sun might not last as long as it seems now.

“So I wonder like once COVID goes away will everyone have enough free time to sit down and watch videos?”

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