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Is the world’s largest social media platform in trouble?

Facebook has had a tough year, and according to reports, appears to be in trouble with its users. Is there any truth to this, is it impacting video consumption, and will it have a lasting impact on the world’s largest social media platform?

Facebook’s huge numbers

Facebook remains the world’s most popular social platform. According to Digital 2019: Global Digital Overview it has over 2.271 billion unique active monthly users, over 300 million more than its nearest competitor, YouTube. Facebook is also the 3rd most popular site in the world, just behind Google.com and YouTube.

Not only is the platform huge but also continues to grow steadily, at around 10% per year. Impressive growth for a company that saw such a difficult 2018.

Messenger applications have emerged as key to the company’s success. Whatsapp, owned by Facebook, and Messenger are the two most popular social messaging apps in the world.  Whatsapp or Messenger is the most used messaging application everywhere, except for China, some Middle East countries, and Russia.

With such significant growth and popularity, why is there so much fuss about Facebook?

Real problems or just media hype?

There is no question that the last year has been tough on Facebook’s management team. Mark Zuckerberg was brought up before the senate’s Judiciary and Commerce Committees over user privacy violations. In the court of public opinion, the company has also taken a big dive as evidenced by campaigns to #DeleteFacebook. Many news outlets still report that the social media platform is increasingly unpopular with the young. The performance of the company is more nuanced than that.

The demographics of Facebook user-base has shifted dramatically. It is incredibly popular with the elderly, but not so much with the young. In 2019, the company reported it has more users over the age of 55 than users under the age of 18. Also, most of the user growth is coming from developing countries. For example, India is now Facebook’s largest market, with 50 million users added there in 2018 alone.

 

The data shows that users are spending 5% less time on the site, since the beginning of last year. The company claims algorithm changes in early 2018 are responsible for the decline. However, not only are people spending less time, but they are also engaging with the platform less. The median number of “likes” for posts on Facebook has fallen by 10% in the last six months. People are also clicking on fewer advertisements than they were in July 2018. These worrying trends are hurting video consumption at the site.

What does this mean for Facebook video?

Just a couple of years ago, it looked like the number of video views on Facebook was on track to catch up with YouTube. Today, according to data from Ampere Analysis, Facebook’s video strategy seems to be struggling. The ten-market study shows a declining number of video viewers on the platform. Since Q3 2017, the percentage of internet users that say they have viewed a video on Facebook has fallen from 29% to 24%, while YouTube has held steady at 66%.

Considering Mark Zuckerberg stated two years ago that the company’s strategy was “video first,” the poor performance must be very disappointing.

Facebook has some very real problems, but how will this affect its bottom line as the company continues to grow?

The Future for Facebook

Facebook has some real issues to contend with as well as some encouraging signs.

The addition of new users should more than compensate for the declining engagement of current users and the disinterest of the young.

As well, while Facebook’s video product Watch continues to struggle, there are signs advertisers are warming up to it. According to Jordan Jacobson, head of social at iProspect, his agency is spending “at least several hundred percentage points more on Watch this year.”

However, in the long term, problems with engagement and the aging user-base must be addressed. The amount of time spent with the service is the key driver of ad revenue, the only real way the social giant makes money today. While the lack of interest from teenagers doesn’t seem like a big deal now, it does not bode well for the future. Inevitably, as the user-base becomes ever-older, it will accelerate the decline in active users.

Given a worst-case scenario where Facebook.com stops adding more users and engagement plummets, Mr. Zuckerberg’s dreams of video domination may fall by the wayside. However, the company may still be kept afloat by its subsidiaries. Whatsapp and Messenger completely dominate the social messaging scene and show no signs of slowing down. Instagram, another Facebook-owned service, has more than picked up the slack with teens and continues to grow strongly. Just last quarter, Instagram drove a 28% year-over-year increase in Facebook ad revenue, led by its ‘Stories’ feature.

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