Demise Of Facebook? Engagement Reduced by 50 Million Hrs/Day!
Even though Facebook user engagement has reduced, they are not worried as their revenues remain strong.
Has the demise of Facebook already started?
As per their recent quarterly report, time spent on Facebook has reduced by massive 50 million hours per day; and active userbase in US and Canada has reduced for the first time in their history.
Founder Mark Zuckerberg has dismissed both of these developments as a ‘positive sign’, even as revenues soared to $13 billion.
Now, since almost every penny of their revenue has come from advertisements, what do reduced engagement and active users mean for them?
We try to find out.
50 Million Hours Of Usage Declined Per Day!
Facebook CFO David Wehner has presented their adjusted fourth-quarter earnings and revenue for the financial year 2017-18, and there are reasons for the investors to get worried.
As per the report, users spent 50 million hours per day less on Facebook last quarter, compared to previous period. This translates to approximately 5% of their overall engagement.
In a strange stand, founder Mark Zuckerberg has termed this reduction as good.
As per Mark, Facebook wants ‘userful engagement’ on their platform, rather than plain scrolling of unnecessary videos and posts.
“We think that that’s going to be positive (reduction in engagement). We think it’ll help make the community stronger over the long term, and we think it’ll be good for the business over the long term.”
Facebook had, in fact, made some changes in their Newsfeed algorithm, which made posts from pages less visible for the individual, meanwhile giving more emphasis on posts from friends and families.
But, these changes were made this month and the financial results are for the period Sep-Dec, 2017.
This clearly means that something is wrong here.
Active Userbase Of Facebook Shrank For First Time!
Another fact which highlights that demise of Facebook is evident: Active userbase of Facebook in the US and Canada has shrunk for this first time in history.
Compared to 185 million active users in the Q3 quarter, active users of Facebook from the US and Canada has reduced to 184 million.
Although this is a minor reduction in users, it signifies so many things – primarily being that users are no longer active.
Each user from US and Canada made $26.76 worth of advertising revenue for Facebook, and even a reduction in 1 million of users means massive loss.
Maybe accusations that Russia manipulated public opinion last year’s Presidential election using Facebook as a platform could be one one of the reasons for this decline in users.
Overall, things are looking dicey.
Here is an overview of Facebook’s financial results for Q4, 2017-18:
- EPS: $2.21 vs. $1.95 expected by a Thomson Reuters consensus estimate
- Revenue: $12.97 billion vs. $12.55 billion expected by a Thomson Reuters consensus estimate
- Daily active users: 1.4 billion vs. 1.41 billion expected by a StreetAccount estimate
- Monthly active users: 2.13 billion vs. 2.13 billion expected by a StreetAccount estimate
- ARPU: $6.18 vs. $5.90 expected by a StreetAccount estimate