Facebook owes its resilience to savvy acquisitions and tolerant regulators
In 2003 mark zuckerberg built Facemash.com, a website ranking the attractiveness of his Harvard classmates. The college made him delete it. But the 19-year-old soon launched another site, on which users could create profiles and communicate. TheFacebook.com spread rapidly to other campuses. By 2006, when The Economist first wrote a story about the “student networking site”, it had 10m users.
Today, Facebook’s youth is a distant memory. Only four public companies are worth more than Mr Zuckerberg’s. His dormitory invention boasts over 2bn users. Politicians and businesses use it to sway the public. Now that the social network has grown up, however, teenagers are increasingly avoiding it.
Measuring usage of Facebook is tricky: the firm says it stopped spammers from creating 2bn fake profiles in the first quarter of 2019. But eMarketer, a consultancy that blends Facebook’s reported figures with polls, reckons that 16-year-old Americans are less likely to use it than 60-year-olds are. The share of people aged 12-17 who do so at least once per month has fallen from 60% in 2015 to 39% today. The figure for those aged 45-64 is 58%. A similar trend holds in other countries with reliable data.
One cause is youthful rebelliousness: few teens want to share a network with grandma. Another is the type of content the platform offers, explains Mark Mahaney of rbc, a bank. Whereas Snapchat and Instagram, two newer services, let teenagers document every moment with image filters and animated “stories”, Facebook emphasises its news feed and messages. That is helpful for contacting old friends, but not for photographing breakfast.
Luckily for Facebook, competition regulators permitted its acquisitions of Instagram in 2012 and WhatsApp, an instant-messaging app, in 2014. If one counts Facebook Messenger, a chat app the company carved out from its core site in 2011, Facebook now owns four of the five most used communication apps (excluding email).
Facebook does not break down its revenue by platform, but Andy Hargreaves of KeyBanc Capital Markets estimates that 23% of its $68bn turnover this year will come from Instagram, based on surveys of advertisers. That share will probably keep rising as Instagram offers more ad inventory in the stories format. WhatsApp will introduce ads in 2020—when Facebook plans to launch Libra, a digital currency.
Facebook may soon receive a fine of around $5bn for leaking private data to Cambridge Analytica, but can easily afford that sum. And however unfashionable the company’s namesake platform is becoming, it is still adding more users.
Even if the Facebook site and app become moribund, Facebook the company is likely to remain competitive. Such resilience owes as much to regulators’ past tolerance for a big incumbent gobbling up challengers as to the firm’s deft strategy.