By June 14, 2019

Nobody Uses Facebook Anymore But How Does The Company Still Make So Much Money?

By June 14, 2019

Facebook is no longer cool! That’s the verdict from the young people Mark Zuckerberg targeted when he first launched the social media platform from his dorm in his sophomore year in college. But somehow, the company still makes a lot of money. Here’s the full picture.

Tired Of Facebook? Well, You’re Not Alone.

Last weekend, I was hanging out with a couple of friends. Okay, not really hanging out — just attending an event with some guys but over here, it’s the same thing. And they weren’t all my friends but again, here, you are pretty much old time buddies with whoever you’ve once shaken hands with.

During the chartered bus ride from one end of Lagos to another which took almost forever given that the city’s roads are never free even on weekends, the twelve of us had plenty of time to while away. And between taunting one another and making fun of other people, it was as close to a jolly ride as one can have here.

As there was plenty to talk about, we drifted from topic to topic but there was one that lasted for quite a while – social media. Basically, we were gossiping about the social media habits of people, and one thing the twelve us agreed on — actually, the only thing we unanimously agreed on all day — was the idea that Facebook sucks and is no fun. And that’s just to put it nicely.

“Parents killed it.” “Twitter makes you fall in love with people you’ve never met but Facebook makes you hate people you’ve known all your life.” Those were just some of the nicer comments. By the end of the discussion, it came to light that none of us had used Facebook since 2017 and we’d not log in even if we were going to get paid for it. (Okay, this last part is probably bogus but you get the idea).

And there was more. Everyone seemed to have friends who felt the same way about the platform, and we swore by our social media handles, that those friends had friends who felt the same way. And it went on and on. By now we were just a few minutes away from the venue of the event and the discussion had moved on to why Facebook still makes so much money even though we all now hate it.

There were vague statements about ads and user data exchanging hands but no one really had the juice. By the time we had arrived at the event and were now helping ourselves to bottles of booze and plates of food, I had made a mental note to revisit the topic in between mouthfuls of Asun.

The “Uncles” Really Did Make It “Uncool”

By all standards, twelve people aged between 24 to 31 is not exactly a healthy sample from where solid inference/conclusion can be drawn, but knowing that a handful of people share the same thoughts about Facebook as I had for years was enough to get my motor running.

And when I did revisit the topic — this time, with an internet-enabled laptop — I found some juicy bits. As it is, young people especially are increasingly dumping Facebook (maybe parents really did ruin it), but the company still makes a ton of money. Bang the gavel!

Actually, it’s no verdict. It’s just what it is. These days, it looks like the over-55’s are flooding the platform as the young ones are leaving. And that’s probably why I can’t find anyone in my age bracket who would give a yes to Facebook at the moment.

There are some 7 billion people on the planet and basically one-quarter of those are on Facebook. You’d expect me to not have such a hard time finding at least one Facebook fan in my circle, but maybe my circle is really small (or I just don’t have enough persons aged 55 and above in it), or the platform does actually suck. Whichever way, there is a problem and the available data hardly captures it.

There are over 2 billion Facebook users worldwide. In Africa, the figure is 139 million “active users,” if we can call it that. Africa’s most populous nation, Nigeria, is believed to contribute 22 million active users. When compared to Twitter and Instagram which respectively turn in 6 million and 5.7 million monthly users monthly, Facebook is actually in a league of its own.

But when other metrics like engagement take centre stage, Facebook is basically playing catch up with Instagram and Twitter trouncing it in that respect. And here’s another point for those who claim that “parents killed it” — considering percentage of users aged between 18 and 34 in Nigeria, Facebook only sees 42 percent of its users coming from that age bracket, whereas Twitter and Instagram respectively have 80 percent and 69 percent of its monthly users in that bracket. Now I know why I’ve been having such a hard time finding anyone my age who still “actively” uses Facebook.

Well, that puts things into perspective. Facebook is still king in terms of users but its numbers in other respects are not as impressive because the category of users that should normally interact with its content has probably gotten bored of “trying to find out who’s doing better between them and their childhood friends” and moved on to other things.

Is Facebook Dying A Slow But Inevitable Death?

When Mark Zuckerberg launched Facebook, he was a 19-year-old living in a dorm in his second year at university. Fifteen years later, it is the young people he was so successful at enticing to join Facebook, the same ones that helped it become the world’s biggest social networking site, that are now his biggest problem.

In the U.K. and U.S., more than 3 million under-25s were estimated to have either quit Facebook or stop using it regularly in 2018, and interestingly, many of them blame it on the “lack of freedom” in having to increasingly share the space with their folks. So, ditching the platform altogether for “cooler ones” or using it occasionally became an option they had to take.

Some even go as far as expressing ‘doomsday-esque’ claims of the platform shutting down someday because it has become really “uncool” — and it doesn’t help that that word sounds like “uncle.”

Over here in Nigeria, it’s basically the same story. In the Instagram and Twitter-sphere back here, if you make one gaffe in error or ignorance on Twitter on Instagram, the “savage community” will say you just joined from Facebook.

We actually call them “Facebook People” — the uncool cousins from the village who just came to the city. If there were any such thing as “Social Media Country” during the Roman empire, Facebook users would be the ones the nobility like to call peasants. (No offence.)

But when have you have a two-billion-strong army, it’s hard to see you getting defeated, and in truth, Facebook is not going anywhere anytime soon but when you hear what a lot of young people say about the platform these days, you actually get the true undertones of internet life; impermanence.

Remember MySpace? It’s a testament that unlike other things, digital businesses age in “dog years” — today’s hottest property might become yesterday’s news in the blink of an eye. Even though Facebook does seem like a juggernaut in the space at the moment, user apathy is starting to creep in, and things can go downhill from there pretty quickly.

And the company must have realised this given its moves in recent times. In 2012, Facebook acquired Instagram for USD 1 Bn, and two years later, it followed that up with another big money purchase of WhatsApp. This has helped it keep a proportion of its disillusioned youngsters who are now better suited to those platforms. But Snapchat remains the biggest winner in the ensuing scramble.

According to Ampere Analysis, about 44 percent of Snapchat users are aged 18 to 24, while just 20 percent of Facebook’s are now in that very vital age range.

The exit of youth is being offset by the influx of older people, and the very set of people that may have joined Facebook in their youth are probably now heading into their 30s and 40s. This is what eMarketer considered when it estimated an increase of about 3.6 million over-35 Facebook users in the U.S. and U.K., in 2018.

These days, there’s a growing feeling that Facebook has reached its peak and has now plateaued, with growth stalling. One of the biggest challenges is that Facebook appears to be saturating core, western markets, where things have really slowed down. And that’s where it has most of its business.

If you consider the fact that most of the population likely to get on the platform are already on it and are perhaps now ditching it, you get the idea that it can’t grow much further.

So, How Come It Still Makes A Ton Of Cash?

For a company many would describe as having gone through its best days, Facebook still makes a lot of money, and probably will continue to do so for many more years. The feeling is that even though it is no longer doing so great as a social networking community that appeals to the cravings of youngsters, it is still holding its own quite well as a well-oiled business machine.

Facebook made more than USD 40 Bn in revenue in 2017, approximately 89 percent of which came from digital advertisements. The company also announced second-quarter earnings on July 25, 2018, reporting USD 13.2 Bn in revenue. Facebook has grown to become one-half of what looks like a dominant digital advertising duo, Google being the other half.

But where Google allows advertisers to connect with customers via keyword searches, Facebook earns its bread primarily from targeted advertising and user data.

Yes, user data. And they’ve come under fire for it a number of times with the most recent dating only as far back as March 2018 where the company was rocked by a scandal which placed it in the middle of a breach of privacy agreements. It was alleged that Facebook had compromised user data, privacy and security by granting multinational companies direct access to the personal information of its users.

Not too long ago, The New York Times reported that Facebook had given access to contact information, private messages, and friends list of its users to a number of companies including Spotify, Amazon, Microsoft, Yahoo, and Netflix. The now infamous Cambridge Analytica Scandal which had Zuckerberg testifying before the U.S. Congress on several occasions was borne out of Facebook’s claims that it stopped selling access to user data years ago when solid evidence pointed to the contrary.

More Money, More Problems

As it stands, Facebook makes the bulk of its revenue from targeted ads on its social networking platform (thanks to its wealth of personal data about users from its expansive product ecosystem for ads), and a small chunk of money from its messenger service which has recently begun displaying — you know it — ads. And it might have similar plans for its popular messaging app, WhatsApp, which it acquired in 2014 for USD 21.8 Bn. But all that “ad talk” could well prove its undoing.

The advertising-based model seems to be bringing in the funds but it is also alienating the very users the platform was built for.

As The Guardian puts it; “Flooding users’ timelines with more and more commercial messages may please investors – Facebook’s advertising dominance has pushed the company’s stock market value past USD 522 Bn – but it is being unfriended by its user base.” I know I speak for a lot of people when I say ads are annoying. You know the rest.

Last year, Facebook responded by tweaking its news feed algorithm to give priority to what friends and family share, and cutting down on the amount of advertising content from publishers and brands, which was said to be “crowding out the personal moments”. Zuckerberg said the company was focused on “making sure the time we all spend on Facebook is time well spent.”

But then, there’s the problem of fake news and inciting posts which have seen the platform been, in truth, unfairly fingered many times as the offender, having failed to prevent the real offenders from fomenting trouble. Actually, Facebook has made moves to curb the menace of fake news but you get the feeling that the jury is already out on them.

It starts with one big brand like Unilever — the world’s second-biggest advertiser — threatening to withdraw its advertising from Facebook and YouTube unless they cleaned up the “swamp” of opaque business practices and dodgy content, and then there’s another. And another. And advertising revenue starts to do a nosedive. More so, issues like last year’s Cambridge Analytica data scandal does not help matters.

To conclude, here’s what I’ll tell anyone who wants to hear my take on Facebook;

  1. As a social networking community, Facebook is not doing so great at the moment, especially as its core purpose is to sell targeted content from marketers to individuals, not to promote personal moments.
  2. Young people are ditching the platform or keeping visits at a minimum because it appears many people are now bored of “being nosey,” or just wary of their folks snooping around. (Some of my friends say Facebook is kind of a snitch that informs on you to your parents.)
  3. Facebook; the social networking platform, not the advertising medium or the tool for notorious fraudsters, has grown as big as it can get. Let’s face it; if you’re active on Facebook right now, you joined years ago. If you’re not active, you don’t like it and have moved on to others. And if you never signed up and are currently reading this, you’ll probably never join. So, where will the new signups come from? Certainly not from kids in Class Six at the moment.
  4. The company has ensured its future by making shrewd acquisitions in Instagram and WhatsApp (the new cool kids on the block), but Facebook, as we know it, is going through an “Innovator’s Dilemma” as there isn’t much more innovation to be done (except Zuckerberg has some major tricks up his sleeves; considering his pedigree, I’ll say we shouldn’t rule that out), and the reliance on advertising money will ultimately prove the Achilles Heel.
  5. Even though my friends and I can’t think of anyone who still uses Facebook, the platform still boasts over 2 billion monthly active users (most of whom cannot exactly be called “young and trendy”) and still forks in a boatload of money from targeted ads. That should keep the giant on its feet for years to come. Up until something cooler steals the show, knocks it off its perch, and shows it up as the awkward dad on the dancefloor that it is becoming, that’s if it already isn’t.

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