Despite Facebook’s obvious popularity and influence, some believe the company’s rebranding to Meta is evidence of systemic problems within the company.
In this article, we’ll take a look at some recent history of the social media platform and where it may be headed in the future.
Table of Contents
Declining popularity
Facebook’s declining popularity has been years in the making. This is particularly true of users from developed countries in the 18-24 age bracket whose numbers have been on a downtrend since around 2012.
Facebook’s decline in younger users is due to the emergence of competitors such as TikTok which has captured the short video market with ease.
TikTok is the Chinese creative social media platform driven by short-form video content enabling users to interact and generate content at scale. TikTok primarily makes money through advertising, and it generated $4.6 billion in advertising revenues in 2021, thus making it among the most popular attention-based business models or attention merchants.
But Mark Zuckerberg is more concerned with the amount of time users are spending on TikTok as opposed to the number of young users Facebook is losing to the Chinese-owned platform.
Engagement, as we noted above, reduces ad spend and subsequent ad revenue.
Many users also abandoned Facebook after Apple introduced a transparency feature requiring users to provide consent for ID-based app monitoring.
The company has vast resources to draw on, but this was the first time it had reported an overall decline in user numbers.
It remains to be seen whether the drop in users and ad revenue will cause a downward spiral that impacts the platform’s future viability.
Rebranding
Nevertheless, in October 2021, Zuckerberg announced that Facebook would change the name of its holding company to Meta.
The move was based on the company’s belief that the metaverse is poised to be the true successor of the mobile internet.
The rebranding would also remove the “confusion and awkwardness” of the company sharing a name with its core product.
Meta now encompasses Facebook – its largest subsidiary – in addition to apps such as WhatsApp, Messenger, and Instagram.
Virtual reality-based brands such as Oculus now report their revenue separately thanks to substantial growth in the industry.
Public relations crises
While many believe in the long-term viability of the metaverse, others point toward Facebook’s history of public relations crises as a driver of the rebranding effort.
Tens of thousands of documents were leaked by a former employee in late 2021 which showed the company was well aware of the deleterious health effects of its products.
Cited examples included Instagram’s effect on teenage mental health and Facebook’s history of fanning ethnic violence in countries such as Ethiopia.
Facebook was also cited as a major source of misinformation concerning the 2020 US Presidential Election.
These crises have permeated Facebook’s corporate culture, with many employees frustrated at the company’s strict policy toward employee dissent and preference to prioritize profits over people.
The future of Meta
Irrespective of the reasons behind the rebranding, the future success of Meta is not guaranteed.
There is a risk that Zuckerberg’s vision of the future does not materialize, which would negatively impact the company’s bottom line.
Even if the metaverse does succeed, however, there is the risk it will be construed as just another social media network where the company can exert influence via its sometimes questionable practices.
Key takeaways:
Despite Facebook’s influence and title as the world’s most popular social media platform, some believe the company’s rebranding to Meta is evidence of systemic problems within the company.
Facebook has suffered a decline in users in recent times, especially among younger people whose numbers have been decreasing since 2012. As engagement levels have dropped, so too has ad revenue – a critical source of income.
Some believe Facebook’s rebranding to Meta was an attempt to repair a tarnished brand, while others, including Zuckerberg himself, claim it was to position the company to profit from the future metaverse.
Facebook, rebranded as Meta in 2021, is primarily owned by Mark Zuckerberg, founder and CEO. Zuckerberg keeps tight control over the ownership and decision-making of the company. Other large individual shareholders comprise former COO Sheryl Sandberg and co-founder Eduardo Saverin. Large institutional investors include BlackRock, Vanguard, and Fidelity.
Facebook, the main product of Meta is an attention merchant. As such, its algorithms condense the attention of over 2.91 billion monthly active users as of June 2021. Meta generated $117.9 billion in revenues, in 2021, of which $114.9 billion from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm).
ARPU, or average revenue per user, is a key metric for attention merchants like Facebook. It assesses the ability of the platform to monetize its users. For instance, by the end of 2022, Meta’s ARPU worldwide was $10.86. While in US & Canada, it was $58.77; in Europe, it was $17.29; in Asia, $4.61 and in the rest of the world, it was $3.52.
The ARPU, or average revenue per user, is a key metric to track the success of Facebook – now Meta – family of products. For instance, by the end of 2022, Meta’s ARPU worldwide was $10.86. While in US & Canada, it was $58.77; in Europe, it was $17.29; in Asia, $4.61 and in the rest of the world, it was $3.52.
As of September 2022, Facebook, rebranded as Meta, is a profitable company, generating $18.54B in net profits. Yet, if we look at its Reality Labs segment, which is in charge of building the Metaverse, it recorded a net loss of $9.44 billion in the first nine months of 2022.
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, productmanagement, investor relations, and so on).
Instagram makes money via visual advertising. Acquired by Facebook for a billion-dollar in 2012, today, Instagram is integrated into the overall Facebook (now rebranded as Meta) business strategy. In 2018, Instagram founders Kevin Systrom and Mike Krieger left the company as Facebook pushed toward tighter integration of the two platforms. In 2022, Instagram is the most successful product still, in Meta’s portfolio.
Founded in 2009 by Brian Acton, Jan Koum WhatsApp is a messaging app acquired by Facebook in 2014 for $19B. In 2018 WhatsApp rolled out customers’ interaction services, starting to make money on slow responses from companies. And Facebook also announced conversations on WhatsApp prompted by Facebook Ads.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
