Under the competitive pressure of its Chinese rival Tiktok, Facebook wants to become more attractive, especially for young users. All Facebook apps get the goal of becoming the best service for young adults between the ages of 18 and 29, “instead of optimizing for a larger number of older people,” said founder and boss Mark Zuckerberg. At the same time, Facebook is investing billions in building a virtual world that Zuckerberg sees as the next communication platform.
The focus on young users will have consequences, Zuckerberg said in a conference call with analysts on Monday. In other age groups, there will probably be less growth as a result – but it is the right approach in the long term. At the same time, it will “take years, not months, to fully implement the change”.
The Facebook boss described the video service Tiktok as “one of the most efficient competitors we have ever faced”. Specifically, the plans seem to mean, among other things, that short videos – Tiktok’s core business – will be more prominent on Facebook and the Instagram photo service. Most recently, 60 percent of video advertising revenue came from portrait clips that were less than 15 seconds long.
Young adults have traditionally been a “strong base,” said Zuckerberg. “And that’s important because they are the future.” In the past decade, however, the user base has become more diverse and Facebook has focused on being there for everyone. Now the needs of the younger generation should become the “guiding star”. The swing could have financial reasons: Among the most recently published Facebook documents are analyzes that show that the platform is used less by young people in the USA.
The current wave of critical media reports based on internal documents rejected Zuckerberg as a “coordinated attempt” to present Facebook in the wrong light. Among the allegations that go back to the former Facebook employee Frances Haugen, it is particularly serious that the company knew, thanks to surveys and data analysis, that its services cause damage in real life – but ignored this in order to make money.
There was no change in the group name, which has been speculated about since last week, when the quarterly figures were presented. According to media reports, a new name should lead other apps like Instagram out of the shadow of Facebook – the group’s first and most important platform. At the same time, it is also about anchoring the evolution towards the “metaverse” – a virtual environment in which real and digital worlds intertwine. Zuckerberg reaffirmed that he saw this as the future of communication.
Even without a new company name, the “Metaverse” activities are taking shape. Facebook announced that the previous area around virtual reality – the Facebook Reality Labs – should be shown separately in the balance sheet from the coming quarter.
The Reality Labs are likely to be the part of the company in which the “Metaverse” will primarily be developed in the coming years. In the current quarterly report it was said that the investments in the division would depress the operating profit of Facebook alone by around 10 billion dollars (8.6 billion euros). More costs will follow: In the next one to three years the group will first create a basis for the “Metaverse”, said Zuckerberg. “This is not an investment that will be profitable for us in the foreseeable future.”
Analyst Mike Proulx of the consulting firm Forrester Research emphasized in a comment that the “Metaverse” would not improve Facebook suddenly. If the company continues to struggle with misinformation, extremist content and privacy concerns, “these problems will follow Facebook into the Metaverse,” he warned.
The advertising business continues to provide the money for Facebook’s future projects. In the third quarter, ad revenue grew roughly a third year over year to $ 28.3 billion. Facebook complained about “headwinds”, especially from Apple’s new rules for more privacy on the iPhone.
Since the summer, all app developers have had to explicitly ask iPhone users for permission if they want to track their activities across different applications and services for advertising purposes. According to surveys, most users reject this. Accordingly, many previous business models in the advertising industry are getting mixed up. According to Facebook, it has become more difficult to personalize advertising and to provide advertisers with data on the efficiency of their ads.
In terms of total group sales in the past quarter, Facebook now missed the analysts’ expectations. They had calculated on average a good 29.5 billion dollars. Facebook managed an increase of 35 percent to 29 billion dollars. But at the same time the group exceeded the market forecast for earnings per share. The bottom line was that Facebook earned around $ 9.2 billion – 17 percent more than in the same quarter of the previous year.
The number of daily active users on Facebook rose within three months from 1.91 to 1.93 billion. At least one app from the Facebook group – such as Instagram or WhatsApp – recently accessed 2.81 billion users every day. That was 50 million more than at the end of the second quarter.