Explained: What the Decline in Facebook’s User Base Means for Meta

Even as its family of apps continued to see modest user growth, the Facebook app — mainstay of parent company Meta — watched User growth sequentially falling for the first time since its inception. In addition, the Facebook-backed digital currency project Diem was shut down and its assets sold to a bank, dealing a serious blow to the company’s ambitions for vertical integration in the planned Metaverse.

The Decline of Facebook and Why It Happened

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

Overall, the company reported revenue of $33.67 billion for the three-month period, compared to $28.07 billion for the same period last year.

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

What else did Meta announce?

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

Of the $33.67 billion in total revenue, the Reality Labs segment accounted for just $877 million, suggesting the company’s road to its Metaverse ambitions has a long way to go.

What happened to the Diem project?

The Diem project, formerly called Libra, has faced a cold response from regulators since its inception in 2019. It was originally envisioned as a stablecoin based on a basket of national currencies that could serve as a global currency. Backlash from regulators, largely due to the currency’s proximity to Facebook, even led to Libra’s name change to Diem to demonstrate “organizational independence.”

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

What does that mean and how have the markets reacted?

A decline in the number of users logging into Facebook each day indicates saturation of the company’s flagship product in global markets, suggesting that it may no longer be able to expand its user base.

Additionally, Meta’s chief financial officer, Dave Wehner, told analysts in a conference call that the impact of Apple’s privacy changes for 2022 could be “on the order of $10 billion.”

Meta shares plunged 20 percent late Wednesday (US time), wiping out nearly $200 billion of its market value.

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