Explained: What the decline in Facebook user base means for Meta

Facebook's daily active users have fallen for the first time since its inception. Further, its Diem project has been shut down. What does this mean for Meta? How have the markets reacted?

A 3D printed logo of Meta is seen in this illustration. (Reuters: Dado Ruvic)

Even as its family of apps continued to record modest user growth, the Facebook app — mainstay of parent company Meta — saw user growth falling sequentially for the first time since its inception. Further, the Facebook-backed digital currency project Diem was shut down and its assets sold to a bank, in what dealt a huge blow to the company’s vertical integration ambitions in the proposed metaverse.

The decline in Facebook, and why it happened

In the October-December quarter, Facebook’s daily active users fell by about half a million, from 1.930 billion during July-September to to 1.929 billion. This loss was mainly due to a slide in contribution from Africa and Latin America, it said.

Overall, the company reported a topline of $33.67 billion during the three-month period, compared to $28.07 billion in the same period in the previous year.

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As per Reuters, Meta reported a weaker-than-expected forecast, blaming Apple’s privacy changes and increased competition for users from rivals like TikTok.

What else did Meta announce?

For the first time, Meta started reporting its financial results in two segments — the Facebook Family of Apps that includes Facebook, Instagram, Messenger, WhatsApp and other services; and Reality Labs, which has augmented and virtual reality-related consumer hardware, software and content.

Of its total revenue of $33.67 billion, the Reality Labs segment accounted for only $877 million, suggesting a long path ahead in the company’s pivot to its metaverse aspirations.

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What happened to the Diem project?

The Diem project, which was earlier named Libra, has seen a cold response from regulators since its launch in 2019. It was initially envisaged as a stablecoin, based on a basket of national currencies that could serve as a global currency. The backlash from regulators, mainly on account of the currency’s proximity to Facebook, was what even led to the name change from Libra to Diem, in an attempt to show “organisational independence”.

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Earlier this week, the digital currency project announced the sale of its assets to bank holding company Silvergate Capital, hitting the last nail in the coffin for the project.

What does this mean, and how did the markets react?

A fall in the number of users logging in to Facebook each day suggests a saturation of the company’s chief product in the global markets, indicating it may no longer be able to expand its user base.

Further, Meta’s Chief Financial Officer Dave Wehner told analysts in a conference call that the impact of Apple’s privacy changes could be “in the order of $10 billion” for 2022.

Meta’s shares plummeted 20 per cent late Wednesday (US time), wiping out nearly $200 billion of its market value.

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