Facebook Lost Users for the First Time in its Lifetime And We Know Why!

Facebook on Wednesday disclosed its financial report for the fourth quarter of 2017. And, it revealed two important details: first, it lost users in the US and Canada for the first time and second, that its users were spending less time on the site.

Here are the numbers: Facebook’s daily active users was 1.40 billion, representing a 14%  increase from the previous year. Yet its user base in Canada and the US fell from 186 million, to 185 million.

That is not a huge drop, but it is worrying for the company because this is where it makes its most revenue. Facebook earned an average revenue of $26.76 from this region, compared to the $6.18 it earns globally.

Users are spending less time on Facebook

In another disclosure, users are spending less time on the social media site than before. The total time spent by users on the platform fell by about 50 million hours a day in the fourth quarter of 2017, according to its latest financial report. Here is an outlook:

Surprisingly, this drop came long before Zuckerberg announced plans to reduce ads, news and other viral contents from users’ newsfeed. It was obvious at the time of that announcement that Facebook’s revenue would significantly be affected. And it did appear that fake news may be reduced on the platform. But there’s something else Zuckerberg failed to let us know.

Fake News Is Not The Problem

When Zuckerberg made the announcement about reducing meaningful content for the sake of social interactions, analysts raised eyebrows.

Of course, Facebook had been battling Fake news over the past two years. But that didn’t seem to have been the real motivating factor, analyst concluded. They attributed it instead to a decline in the time people spent on the platform.  And right now, they are probably very correct.

When Zuckerberg made that decision, it was obvious that it would affect earnings and users. But the drop in the time users spent on the site came long before he made that decision public.

This could mean that Facebook is becoming less relevant than it once was, and this spooks Zuckerberg a lot. The same concern disrupted MySpace and other older social media sites, and he is presently trying to kill SnapChat, so of course, he should worry.

Higher Earnings Mask the Struggle to Survive

Overall though, Facebook’s earnings are up, really up. Its total revenue jumped 47% to $12.97 billion in Q4, and its earnings for the year also rose 47% at $40.65 billion.

But the decision to trade earnings for user social interaction appears to be a struggle for survival, rather than any sort of assault on fake news.And surprisingly, the latest earning’s report disclosed that the move to emphasize social interaction was already being implemented by the fourth quarter.

Whether this is true, or just a ploy to allay shareholders’ worry, we can’t really tell. But what could be true is that Facebook has a user retention problem, at the moment. Its share price fell –4%, but picked up +4% after that disclosure was made.

Unless Facebook looks for ways to make itself more engaging and lively, the platform may go the way of MySpace. A harsh call, but not a completely silly one. Or what do you think?