Social media major Meta recorded its first ever quarterly decline in daily active users for Facebook in Q4 2021. The company has been facing headwinds in Asia-Pacific and Rest of World, including tariff hikes in India that has impacted growth in terms of young users and a rise in Covid-19 cases across the globe.
“Facebook user growth was impacted by a few headwinds in the fourth quarter. In Asia-Pacific and Rest of World, we believe Covid resurgences during prior periods pulled forward user growth. User growth in India was also limited by an increase in data package pricing,” Dave Wehner, Meta’s Chief Financial Officer said during the company’s Q4 earnings call.
“In addition to these factors, we believe competitive services are negatively impacting growth, particularly with younger audiences,” added Wehner. The company, in terms of its overall user growth is “certainly seeing an impact from strong competition, particularly with younger audiences,” Wehner said.
“If you look at kind of the overall user growth landscape for the fourth quarter, we’re seeing MAU and DAU in the US and Canada, sort of bounce around as sort of expected and indicated given our high level of penetration. And then if you look at the Rest of World, we’ve seen some headwinds there, kind of a little bit unique in the quarter in areas like India, where we saw data plan pricing increase lead to slower growth there. So that’s another kind of some unique elements of the quarter on that front,” he said.
Facebook daily active users were down to 1.929 million in Q4 2021 from 1.930 million in Q3 2021. The company’s user base growth was flat across more regions. However, it’s user base declined in United States and Canada, down to 195 million from 196 million in the previous quarter.
Overall, Meta’s Family of Apps (FoA), which includes Facebook, Instagram, Messenger, WhatsApp and other services reported a daily active user base of 2.82 billion. A slower growth sent Meta’s stock down over 20 per cent on Wednesday.
However, Meta still remained widely profitable with its total revenue for the full year 2021 growing 37 per cent to nearly $118 billion. Its Q4 total revenue stood at $33.7 billion, up 20 per cent. Its Q4 total revenue from its ‘Family of Apps’ was $32.8 billion, up 20 per cent while ad revenue during the quarter stood at $32.6 billion.
The company however has been recording losses in terms of Reality Labs, its division which includes augmented and virtual reality related consumer hardware, software and content.
Reality Labs operating loss was $3.3 billion in the fourth quarter. For the full year 2021, Reality Labs operating loss stood at $10.2 billion. Mark Zuckerberg, Meta founder and CEO, said, “I’m encouraged by the progress we made this past year in a number of important growth areas like Reels, commerce, and virtual reality, and we’ll continue investing in these and other key priorities in 2022 as we work towards building the metaverse.”
The social media major has also been facing headwinds in terms of engagement across its apps, impacted by Reels, Instagram’s short video offering.
“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetise at lower rates than Feed and Stories,” said Wehner.
“On the pricing side, we expect growth to be negatively impacted by a few factors: First, we will lap a period in which Apple’s iOS changes were not in effect and we anticipate modestly increasing ad targeting and measurement headwinds from the platform and regulatory changes,” he said.
“Second, we will lap a period of strong demand in the prior year and we’re hearing from advertisers that macroeconomic challenges like cost inflation and supply chain disruptions are impacting advertiser budgets. Finally, based on current exchange rates, we expect foreign currency to be a headwind to year-over-year growth,” he added.
However, Zuckerberg remains bullish on the offering. He said, “With this product, what we see is, there is very clear product market fit, and it is growing incredibly quickly. It – we face a competitor in TikTok that is a lot bigger, so it will take a while to compound and catch up there. But fundamentally, we think that there’s just a lot of potential for it to continue growing.”
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