Facebook’s growth continues to slow down

The era of Facebook’s nonstop growth has long since come to an
end. Although the company is far from the point at which it
might start to shrink, its growth in the US and Canada, as well
as Europe, has stopped entirely and
appears to occasionally decline
.

In its 2018
third quarter earnings report out today
, the social network
confirmed that the number of daily active users in US and
Canada has remained flat at 185 million, while the number of
European users has slipped from 279 million to 278 million. The
latter may be a direct result of recent European privacy
regulations, namely GDPR, which initially caused Facebook to
lose 1 million monthly active users after it went into effect
in May.

Overall, the company continues to grow thanks to international
expansion, adding 9 percent year over year to its daily active
user base for a total of 1.47 billion people. The total number
of monthly active users grew 10 percent from this time a year
ago, to 2.27 billion people.

Facebook has stopped growing in its most lucrative
markets

But despite that, and the fact that the company continues to
grow its digital advertising business at an astonishing rate,
the rate at which Facebook is growing continues to decline
quarter to quarter and year over year. And it’s no longer
growing in the markets in which it makes the most revenue per
user (North America and Europe). So the fear of more user
falloff and a lack of new user retention — and the inevitable
ad revenue decline that would instigate — has some critics and
analysts worried about its future.

Facebook says it grew ad revenues 33 percent year over to year,
to $13.73 billion, coming in just under Wall Street analysts’
estimates. Profit was $1.76 a share, well over analyst
expectations. Both monthly and daily active user growth figures
came in under Wall Street estimates. Still, the company has
done a good enough job warning its investors and the press of
this eventual turn of events, leading to tempered Wall Street
expectations this quarter after it suffered the
biggest ever decline in the history of the American stock
market
last quarter. So Facebook’s share price has
understandably remained steady in after-hours trading as a
result.

But while Facebook’s short-term financial performance continues
to keep it in the upper echelon of Silicon Valley, the
company’s long-term future continues to look less rosy. Over
the past two years or so, Facebook has sustained a number of
high-profile data privacy and security scandals, most
prominently in March with the
Cambridge Analytica debacle
and most recently involving a
massive security flaw that allowed a hacker to
steal the login information of tens of millions of users
.

And since the 2016 US election, Facebook has become a breeding
ground for conspiracy theories, fake news, and propaganda, as
well as a vital espionage and misinformation tool for foreign
governments, some of which, like Russia, have run widespread
influence campaigns to create chaos among voting-age Americans.
The most recent example of such is a campaign
conducted by an Iran-based group
seeking to sow division in
the US ahead of next week’s midterm elections.

While these controversies haven’t really affected Facebook’s
bottom line, at least not yet, public perception of the company
appears to be at an all-time low. Facebook will eventually feel
the effects of users leaving the platform for greener pastures,
unless it figures out how to better moderate its platform. (The
company is spending heavily in that area, adding tens of
thousands of new contract workers and ballooning its headcount
by 45 percent, to nearly 34,000 employees, year over year.)

Given the gradual and consistent decay of its primary social
network, it makes sense that Facebook is increasingly looking
at its ecosystem of apps and services, like Instagram and
WhatsApp, as the key to its future. Facebook pointed out in its
earnings release that “more than 2.6 billion people now use
Facebook, WhatsApp, Instagram, or Messenger (our ‘Family’ of
services) each month, and more than 2 billion people use at
least one of our Family of services every day on average.”

It’s clear the core Facebook app will not remain on top
forever, it seems, and the company is shifting resources toward
ensuring its other platforms can fill the gap as teenagers grow
up in a world where Facebook is profoundly uncool and more
adult users grow disillusioned or uninterested and walk away.
Instagram, although it
just lost both of its co-founders
, has a lot of room to
grow its ad business, and Messenger and WhatsApp have just
started to properly monetize channels for businesses to reach
customers. Facebook’s role as the do-it-all social network may
be winding down, but its future as a web of successful
photo-sharing and messaging apps is just getting started.

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