Facebook announced a drop of a million daily users at their fourth quarter 2021 earnings call. It is the first time they have shed users since inception, and the market responded harshly. Their parent company, Meta, sustained a staggering blow as its market value fell off a cliff, losing over USD 230 billion. This is the largest single day devaluation of any listed company in US history.
Facebook is not only facing stiff competition from rivals, especially TicTok, but they are also suffering from the effects of the controversial online privacy debate. Last April Apple introduced privacy settings that limited user tracking across apps by social media platforms. Facebook ad revenues have been the hardest hit from this move as advertising accounts for nearly 98% of its business.
New strategy needed to defend domain
Perhaps it is not all that surprising that Meta needs to rejig its business model. Recently, their CEO Zuckerberg informed staff that there is an urgent need to prioritize video to counter the onslaught from TicTok, and he had also previously declared their big bet on the metaverse.
It is not a new phenomenon when, in order to remain relevant and profitable, established media organizations make adjustments to protect their turf against newbies. The arrival of the printing press in the fifteenth century diminished the power of the clergy. The spread of newspapers in the seventeenth century orchestrated an organized system of promoting brands that spawned the modern advertising industry.
Radio’s appearance in the nineteenth century elevated mass media’s ability to reach a universal audience regardless of age and education. However, their party was interrupted by television. The audiovisual platform flourished in the mid-twentieth century and ushered in the golden age of advertising on the back of post war optimism and consumerism.
New platforms create new segments, split budgets
When the World Wide Web emerged in the late twentieth century there was talk of the death of the thirty second spot, or the fall of television advertising. This prediction hasn’t come to pass for over three decades and online media has only recently taken the dominant share of ad revenue.
The bulk of this ad spend is directed at search and social media that benefited from Web 2.0 which gave users access to unlimited information, entertainment and the ability to interact in real time. These features attracted billions of users globally.
Whenever the media landscape is pierced by hungry invaders armed with new technology, the current inhabitants dig in their heels and prepare for pitched battle. Unwilling to relinquish the spoils of massive advertising expenditure, established platforms and media brands secure their holdings by returning to their core strengths which are unique and proven.
It is surprising though that Facebook is enduring similar setbacks that affected dominant media brands this soon. Old media was cautious about expanding into new niches at the expense of their core audiences when competition came calling. Instead they launched new and distinct media brands to outmaneuver the upstarts and leverage on the lucrative segmentation opportunities.
Endlessly extending features is risky
Facebook’s intention to widen product features to protect its market share is akin to line extension in brand management which eventually erodes the master brand. They might have to live with the fact that countering the competition with fighter brands could lead to self-cannibalization when audiences move from one platform to another within the same holding company. This is perhaps preferable to being consumed by external predators altogether.
Currently, users are swarming to TicTok led by the younger generation, mostly because of its novelty. But when some of those users return to the platform they love because they want to stay connected with friends and family, discover what’s going on in the world and share and express what matters to them, will they find an undiluted brand, or will it have morphed into a TicTok lookalike?