Facebook reported that its streak of user growth had come to an end, after a staggering growth for 18 consecutive years. Stocks went down by 26% leading to a loss of market value of $230 billion.
What could be the reasons for decline of user growth of Facebook?
1. Losing users to short video industry, especially TikTok. Facebook has always struggled to compete with TikTok especially in a market like the US.
2. Company expenses skyrocketing as it poured $10 billion in augmented and virtual reality hardware to build its “metaverse”.
3. Recent update from Apple in iOS regarding privacy of users made it harder for apps to track iPhone users would cost about $10 billion in advertising revenue this year.
What is usually the business cycle of a company?
What has grown in numbers and wealth, must come down. This is explained well using the Sigmoid Curve. Sigmoid curve well explains the life cycle of a business.
There are 4 phases in a Sigmoid Curve ~
1. The learning phase – This is the initial stage of the company, usually companies struggle a lot in this phase and see a decline in numbers, it is where they have to be the strongest.
2. The growth phase – Growth phase is when the company has enough funding/revenue to run the setup and sees acceptance by the consumers.
3. C3 phase – The 3rd phase is very interesting, it is when the company realises that stagnancy is near and it is time for ‘Chaos, Choice and Change’. It decides the 4th stage whether is will decline or re-grow again. Good companies are good at envisioning the future.
4. The decline/new chapter phase – This depends on the C3 phase, if they learn early, they might grow or end up getting out of business.
What makes Facebook (Meta) relevant even today?
It is the evolution, from a social networking website to a full fledged social media. It’s smart acquisitions over the years (WhatsApp, Instagram, Oculus, Giphy, etc) will keep it significant even in the future.
The Metaverse is something they have a huge bet on. They bet on its crypto, emerging markets like India, Africa. So will be very interesting to see where the company goes in the next decade.