Chief executive Mark Zuckerberg told analysts that Facebook would now prioritise younger users at the expense of older ones, after leaked documents revealed the social media network was losing popularity among the under-30 demographic.
Zuckerberg said on an earnings call on Monday that the company would be “retooling” its teams “to make serving young adults the north star, rather than optimising for the larger number of older people”.
This will involve trade-offs, he said, coming at the expense of older users whose numbers would be likely to “grow more slowly than they otherwise would have”. The overhaul would take “years” to execute, he added.
The shift comes as Facebook battles a torrent of negative press coverage, after numerous news outlets, including the Financial Times, obtained thousands of pages of leaked documents revealing some of the inner workings of the company.
Among these, multiple memos showed the group’s years-long struggle to keep its edge with younger users, most recently in the face of stiff competition from newer social media rivals including ByteDance’s TikTok and Snapchat.
According to a March document, first reported by The Wall Street Journal, daily user numbers in the US on Facebook for teens and young adults — people aged 18 to 29 — are in decline and projected to fall by 4 per cent and 45 per cent respectively in the next two years.
Another internal study from last year found that young people consider the social network “outdated” and “boring”. Instagram, which Facebook bought in 2012, has also experienced declines in younger users’ posting and consuming content.
Zuckerberg acknowledged that competition was becoming more “intense”, citing both Apple’s iMessage service and TikTok. He added that the company would make “significant changes in the next year” to focus on growing Reels, its clone of the short-form video format popularised by TikTok, and making it a more central part of Facebook’s product experience.
“Every once in a while, a format comes along that allows new types of content,” he said, citing the news feed and ephemeral Stories features on Facebook. “From everything I’ve seen Reels has the potential to be something of that scale.”
Zuckerberg spoke shortly after Facebook posted a 35 per cent rise in third-quarter revenues to $29.01bn, just shy of consensus expectations of $29.5bn. Monthly active users rose 6 per cent year-on-year to 2.91bn, slightly below consensus estimates of 2.98bn, according to S&P Capital IQ.
Facebook also forecast that revenues for the three months to the end of December would be between $31.5bn and $34bn, citing “continued headwinds” from Apple’s requirement for apps to get explicit permission to track users for advertisement targeting purposes. Analysts had forecast a jump to $34.8bn.
The news did little to change Facebook’s share price, which ticked up 1.3 per cent in after-hours trading. This stood in stark contrast with Snap, which lost a quarter of its value last week after missing revenue expectations, blaming the Apple privacy changes.
Zuckerberg struck a defiant tone on the call with investors, pushing back on claims that have arisen from the leaked documents and from former-employee-turned-whistleblower Frances Haugen that the company was failing to curb misinformation and hate speech on the platform, choosing to prioritise profits over safety.
The Facebook co-founder said the latest coverage touched upon issues that were “not primarily about our business, but about balancing different difficult social values”.
He added: “My view is that what we are seeing is a co-ordinated effort to selectively use leaked documents to pay a false picture of our company. The reality is that we have an open culture, where we encourage discussion and research.”
The company also said that from the fourth quarter, it planned to break out results for its Facebook Reality Labs unit, which builds its virtual and augmented reality products, from the rest of the business. It said its recent push to invest in FRL was expected to reduce its 2021 operating profit by roughly $10bn.
It comes after the company announced earlier this month that it planned to create 10,000 jobs in Europe as part of its vision to build a digital avatar-filled virtual world, known as a metaverse. Zuckerberg said on the call that the company hoped to grow the metaverse to 1bn users, and “hundreds of billions of dollars of digital commerce a day”.
However, he cautioned: “This is not an investment that is going to be profitable for us any time in the near future. But we basically believe that the metaverse is going to be the successor to the mobile internet.”
Facebook also announced that it would increase its share buyback programme by $50bn.