Zuckerberg Act II: As growth slows, what is the future of Facebook?

31 Oct 2018

Mark Zuckerberg at Mobile World Congress three years ago. Image: ivi7g/Depositphotos

Facebook has the attention of 2.6bn people on the planet, but is exponential growth a thing of the past for the company? And if so, is that such a bad thing?

Facebook has reported third-quarter earnings and, despite making profits, it failed to reach analysts’ estimates on revenues, daily active users and monthly active users.

After a year of seemingly never-ending privacy debacles and scrutiny over Russian meddling in elections and ‘fake news’, the big blue juggernaut that is Facebook appears to be slipping gears.

‘We’re building the best services for private messaging and stories, and there are huge opportunities ahead in video and commerce as well’

Rather than being an innovative, aggressive young tech start-up that likes to break things, as Facebook has modelled itself for years, it is now very much a mainstay of our digital lives that runs the gauntlet of political pressure every time something breaks. What next, a diplomatic corps for what could be a country in its own right?

Facebook is still an astonishing growth story and more than 2.6bn people use its family of apps, including Instagram, WhatsApp and Messenger. On a daily basis, about 2bn people out of the more than 7bn people on Earth use one of these apps. Astonishing, isn’t it?

On the face of it, things look hale and hearty. Third-quarter revenues were up 33pc year on year to $13.7bn, out of which $13.5bn was advertising, while $188m came from payments and other services. This was below Wall Street analysts’ estimates.

Also below estimates were monthly and daily active user growth figures. Daily active users were up 9pc to 1.49bn while monthly active users were up 10pc to 2.27bn. Net income (profit) of $5.1bn, however, was well above estimates. Meanwhile, mobile advertising revenue represented 92pc of advertising revenues in Q3, up from 88pc a year ago.

Facebook’s headcount was 33,606, up 45pc on last year, largely driven by the need to increase resources around the checks and balances needed to police the social network for so-called fake news, harmful content and possible breaches.

“Our community and business continue to grow quickly, and now more than 2bn people use at least one of our services every day,” said Facebook co-founder and CEO Mark Zuckerberg.

“We’re building the best services for private messaging and stories, and there are huge opportunities ahead in video and commerce as well.”

Zuckerberg’s second act

The sheer presence of Facebook in people’s lives now comes with a weighty responsibility that belies the feisty young start-up image the social network cultivated for the first part of its journey.

Facebook is now on to the second part of its journey and, whether Zuckerberg likes to admit it or not, it has joined the club of established IT giants, from IBM to Microsoft and Apple. You get the sense that Google accepted this fate long ago and is swerving its energies in the direction of being a global cloud infrastructure giant that just happens to also be on more than 80pc of smartphones on the planet.

Facebook has tried for years to make its mark on the SME business world and has undeniably great opportunities in areas such as peer-to-peer payments via Messenger as well as Zuckerberg’s penchant for virtual reality and, lately, home audio and video hardware.

The social media giant has a group of products that people love and really enjoy using but, as Zuckerberg said in a call with analysts, it is taking time for the business to catch up with community growth.

If the bulk of revenues comes from ads in Facebook’s News Feed, photo-sharing app Instagram, Messenger and growth from emerging markets, the crucial things will be security and reliability.

The Stories feature is evolving and 1bn are shared across Facebook’s apps every day. Another crucial growth area will be in the clever things that Facebook has done with its Marketplace buying and selling platform as well as the growing popularity of its Watch platform for selling more video ads.

The biggest clue to Facebook’s future is the word ‘services’ in Zuckerberg’s quote above. Now that it has our attention, it needs to double down on making those services as safe and secure as possible.

The ‘move fast and break things at any cost’ mentality needs to be replaced by a ‘move steady and maintain speed and reliability’ ethos. Facebook’s endurance will depend on those 2.6bn people using that great family of apps in their digital lives for years to come. Don’t wreck it, Zuckerberg.

Mark Zuckerberg at Mobile World Congress three years ago. Image: ivi7g/Depositphotos

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years