Last October, my colleague Kevin Roose wrote a column titled, “Facebook is weaker than we know it.” His story is a series of stories in The Wall Street Journal, based on internal company documents, which reveal the company’s failure to prevent content damaging to their mental health. teenagers, spreading misinformation about vaccines and more.
Kevin writes: “It’s easy if you think Facebook has tremendous power.” “But there was another way to read the series, and it was an interpretation that resonated more in my brain as each new installment came out. That is: Facebook is in trouble.“
The social damage the company is doing seems to be an indication that its operators are struggling to attract more users and taking desperate measures to do so. However, Kevin also includes a big warning: The company’s stock is still up year-over-year, a sign that investors remain confident.
That is no longer the case.
Shares have fallen more than 50% in the past year. In the most recent quarter, the company’s revenue fell slightly and profits down 36%. Mark Zuckerberg, the chief executive, has blamed the widespread economic downturn for reducing spending on digital advertising, and it certainly played a role. But the specific problems faced by Meta, as Facebook’s parent company, seem to be the main cause.
Consider this chart, comparing it to Meta, Alphabet (Google’s parent company), and the S&P 500:
I know that many readers probably still think of Facebook as a giant. And in many ways, it still is. As Kevin wrote: “It is possible that at the same time Facebook is in decline and it remains one of the most influential companies in history, with the ability to shape politics and culture globally.”
This morning, I’m going to address the four biggest problems facing the company.
1. Age problem
If you have children, you may have noticed that they prefer other social media platforms. For many of them, Facebook is for the elderly – it’s not the exact recipe for growth. Helen Lewis of The Atlantic, among others, has described the platform as “Boomerbook.”
Yes, many teenagers and young adults use Instagram that Facebook bought a decade ago. But even Instagram struggled to keep up.
“TikTok is absolutely lunching on Instagram in terms of usage and cultural influence, and advertisers often want to target young people,” Kevin told me. “While Meta has tried to copy TikTok’s most successful features and include them in Instagram Reels, they are limited in how much change users will accept without controversy.”
For example, last month, Kylie Jenner complained to her 361 million followers, “Let’s reinvent Instagram for Instagram.” A mass of protests on Instagram ensuedas Kalley Huang of The Times wrote.
2. Innovation problem
“The company doesn’t seem to know how to invent new things successfully,” Farhad Manjoo of Times Opinion wrote. “Most of its biggest hits — not just its two main products, Instagram and WhatsApp, but many of its most-used features, like Instagram Stories — were invented elsewhere. They come to Facebook through acquisitions, or when that doesn’t work, they copy it outright. “
It’s a big change from Facebook’s first decade, when it transformed the social network. Particularly important is its News Feed, which means users no longer have to spend time searching for other accounts to know what people are posting.
Since the company went public in 2012, it has been much less innovative.
3. Metaverse problem
Zuckerberg felt so strongly that the metaverse – based on the world of virtual reality, or VR – represented the future of the Internet, so he renamed the company after it.
“It’s been almost a year since Facebook rebranded itself to Meta and announced its big push into the metaverse, and there aren’t many big, clear wins to show for it,” Kevin said. . “VR is still quite niche and it is not clear how much use of apps like Horizon Worlds are. (Though, if any Meta employees are reading this, I’d love to know!)
When Zuckerberg announced parts of the company’s platform last week, critics scoffed that it looked outdated. He replied by admitting it was “Pretty basic” and promised “major updates” soon.
A positive sign for the company: It has sold more than 10 million sets of its VR headsets, which could indicate a growing niche. But it’s still unclear if VR will come close to the mass-market appeal of social media.
4. Antitrust Issues
Some Meta supporters argue that the company’s recent struggles prove it’s not the almighty force its critics claim – and that the federal government should take it easy. But I think that statement misses what’s really going on.
The company has become somewhat less dominant because both the Trump and Biden administrations have taken a tougher stance on mergers.
Kevin said: “If Mark Zuckerberg can get away with this problem, as he did by acquiring Instagram in 2012, then he absolutely can. “But the managers, at least under this one, won’t let him.”
One example: The Federal Trade Commission, led by Lina Khan, who has called for tougher antitrust policies, is trying to block the acquisition of Within, a VR fitness startup. by Meta. Khan and her colleagues worry Meta may be trying to discourage future competitors from forming by buying them first.
Depending on your point of view, that’s ironic or appropriate. As Kevin put it, “Facebook has become so dominant, in part by acting in anticompetitive ways over the years, that Meta is losing its dominant position as a result.”
Key point: Facebook remains one of the most powerful companies in the world, with the ability to influence elections, public health and more. It also continues to generate a large amount of revenue, which will allow it plenty of opportunities to create successful new products. But its struggles are real, and they show no sign of going away.
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For 50 years, artist Michael Heizer has worked in a remote part of the Nevada desert, making a sculpture whose dimensions – a mile and a half long, nearly half a mile wide – are hard to fathom. Now, at last, he is ready to unleash his masterpiece, “The City”.
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Thanks for spending part of your morning with The Times. See you tomorrow. – David
PS Theodore Roosevelt becomes the first sitting president to appear in public in a car 120 years ago today (William McKinley was the first to ride in one.)
