Facebook has reported its first ever drop in daily user numbers, triggering a dramatic share price slump for its parent company on Wednesday.
Mark Zuckerberg’s newly rebranded social media empire, Meta, said daily active user numbers at its main app – a key growth target for investors – fell to 1.929 billion in the three months to December, from 1.93 billion in the previous quarter. The symbolic fall of about 1 million users, the first in 18 years, contributed to a share price rout in after-hours trading, as Meta stock dropped 20%, a fall that would represent $175bn in value if it holds when trading starts again on Thursday.
On a call with investors Zuckerberg he was “proud” of the work the company had done last year but acknowledged the company faced tough competition for attention from rivals including TikTok.
“Facebook’s big problem is competition for attention – there are only so many people and so many hours in a day and we’re already close to saturation point,” said Neil Wilson, chief markets analyst for trading platform markets.com
Reporting its first quarterly earnings under its new name, Meta revealed it had spent $10bn on its vision of the future – the “metaverse” – and warned it faced “headwinds from both increased competition for people’s time and a shift of engagement”. As well as Facebook, Meta owns the photo and videosharing app Instagram, the WhatsApp messaging service and the Oculus virtual reality hardware business.
After a boom during the pandemic, shareholders have punished formerly hot tech companies including Netflix and PayPal for disappointing results. While Meta’s revenues were slightly higher than expected at $33.7bn for the last three months, the drop in daily active users has grabbed investors’ attention.
Facebook’s growth has stalled in the US and Europe but the latest falls came from Africa and Latin America. Across all of Meta’s businesses including Facebook, the number of daily active users rose from 2.81 billion to 2.82 billion.
Facebook announced it was changing its name to Meta last October. Co-founder Mark Zuckerberg wants to refocus the company on ambitious plans to build a virtual reality “metaverse”.
Meta also revealed for the first time how much it had spent so far on its new strategy. The company’s Reality Labs division, which makes virtual reality goggles, smart glasses and other yet-to-be-released products spent more than $10bn in 2021. The spending dragged down quarterly profits by 8% and Zuckerberg has indicated that there is much more spending to come.
The company set out a series of issues that could affect growth in the near term, including platform and regulatory changes, as well as tough comparisons to a year when online advertising was boosted by the pandemic.
The move also followed a series of crises at the company, which has been blamed for promoting fake news worldwide, stoking hostilities and invading privacy.
“Although the direction is clear our path ahead is not yet clearly defined,” said Zuckerberg. “Last year was about putting a stake in the ground about where we are heading. This year is about execution.”
