what-happened-to-facebook

What happened to Facebook?

Less than four years after it was founded, Facebook surpassed Myspace in 2008 as the most visited social media site on the internet.

This is a position the platform still holds today with approximately 2.91 billion users – some 348 million more than second-placed YouTube.

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.

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.

Engagement, a key metric in predicting ad revenue, was down 16% for teenagers and 5% for adults in the United States in 2021.

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-business-model
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.

Many unsurprisingly declined to be monitored by apps, which no doubt contributed to the company reporting a $10 billion decline in ad revenue and an associated decrease of 500,000 daily active users

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. 

Read Next: Facebook (Meta) Business Model, TikTok Business Model.

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Mark Zuckerberg Empire

who-owns-facebook
Mark Zuckerberg is the principal shareholder of the company. Not only he retains ownership and control of the company. Facebook, like Google, has issued two kinds of common stocks, Class A and Class B. Where the holders of Class B common stocks are entitled to ten votes per share, and holders of our Class A common stocks are entitled to one vote per share. Mark Zuckerberg has a total voting power of 57.9%. 

Attention-Merchants Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly. Still, it leverages the data users provide and technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data and its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Asymmetric Business Model

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly. Still, it leverages the data users provide and technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data and its algorithms sold to advertisers for visibility.

Facebook Business Model

facebook-business-model
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 was from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm). 

Facebook ARPU

facebook-arpu
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 2021, Meta’s ARPU worldwide was $11.57. While in US & Canada, it was $60.57, in Europe, it was $19.68, in Asia $4.89, and in the rest of the world, it was $3.43.

Facebook Organizational Structure

facebook-organizational-structure
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 organizational structure is organized around the leadership of Mark Zuckerberg and the key executives around him. On the other hand, the function-based teams are based on the main corporate functions (like HR, product management, investor relations, and so on).

Metaverse Supply Chain

facebook-metaverse

Google Business Model

hidden-revenue-model-google
A hidden revenue business model is a pattern for revenue generation that keeps users out of the equation, so they don’t pay for the service or product offered. For instance, Google’s users don’t pay for the search engine. Instead, the revenue streams come from advertising money spent by businesses bidding on keywords.

TikTok Business Model

tiktok-business-model
TikTok is a 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.

Instagram Business Model

instagram-business-model
Instagram makes money via visual advertising. As part of Facebook products, the company generates revenues for Facebook Inc.’s overall business model. Acquired by Facebook for a billion dollars in 2012, today Instagram is integrated into the overall Facebook business strategy. In 2018, Instagram founders, Kevin Systrom and Mike Krieger left the company, as Facebook pushed toward tighter integration of the two platforms.

YouTube Business Model

how-does-youtube-make-money
YouTube was acquired for almost $1.7 billion in 2006 by Google. It makes money through advertising and subscription revenues. YouTube advertising network is part of Google Ads, and it generated more than $28B in revenue by 2021. YouTube also makes money with its paid memberships and premium content.

Twitter Business Model

how-does-twitter-make-money
Twitter makes money in two ways: advertising and data licensing. In 2021, Twitter generated $4.5 billion from advertising and $570 million from data licensing. While Twitter generated $5 billion in total revenues, it lost 221 million.

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