Does Facebook have a future beyond social media?
Advertising has turned the social network into a trillion dollar company. Can new initiatives go further? The deepening of the weekly The Economist
Facebook has always had two faces. One is the grimace of a company that many people, especially politicians, love to hate. President Joe Biden recently accused the social media giant of "killing people" by spreading misinformation about covid-19 vaccines. (He then) backed off a bit after Facebook pointed out that it does a lot to stop the spread of such content and to promote legitimate vaccine advice.
The other side is the happy side of a company that users, advertisers and investors cannot live without. Facebook looks poised to become a long-term member of the exclusive club of companies with a market value of over $ 1trn, which it joined earlier this year.
How can a company with such a political background be so successful? The answer is two sides of the same coin. With more than 2.7 billion daily global users, Facebook's main offerings – its flagship social network (known internally as Blue), photo sharing on Instagram, and messaging on WhatsApp and Messenger – are a magnifying glass. digital of human nature. This lens amplifies the good (helping neighbors in the midst of the pandemic) as well as evil (conspiracy theories and quack cures). It also serves as a remarkable lens for advertisers to focus on the world's consumers. And the duplicity will likely become more pronounced if Facebook were to succeed with its biggest project to date: creating a "metaverse" that would combine a 3D digital world with a physical 3D one – writes The Economist .
At its core, Facebook is a giant advertising machine. Ads generate 98% of its revenue. Blue remains an internationally dominant advertising platform, raking in perhaps $ 55 billion last year, according to KeyBanc Capital Markets estimates (Facebook doesn't break revenue by service). Instagram, which Facebook bought in 2012 for what looked like a colossal $ 1 billion, now makes another $ 20 billion or more, taking its share of overall advertising revenue to nearly 30%, up from just over 10% in 2017.
Debra Aho Williamson of eMarketer, a data provider, praises Facebook's ability to target ads as "incredibly accurate." Advertisers appreciate this very much: Facebook earns more than $ 9 a year for each of its users, about twice as much as Twitter. The company watches what its users do not just on their own services, but almost everywhere online. This allows them to choose which products to sell to a given user, identify others with similar interests, and find out if they bought anything after seeing the ad.
Even before the pandemic hit, this was difficult to counter, especially for small businesses with fewer resources to run sophisticated marketing operations, which make up the bulk of Facebook's 10 million advertisers, but also for most of the big brands. global. Chinese sellers are also spending billions of dollars on Facebook, says GroupM's Brian Wieser, who places ads on behalf of brands. Even though Facebook apps are banned in China, Chinese merchants can sell their wares to Western consumers thanks to companies like Wish, an American online marketplace that helps organize announcements, payments, and shipments.
NO COMMERCIAL BRAKES
Covid-19 has turbo-charged Facebook's car. Confined to home, the average American user spent nearly 35 minutes a day on Blue and Instagram in 2020, according to eMarketer, two minutes longer than the year before. This adds up to thousands of additional years of collective attention. While some companies went belly-up or slashed advertising spending during last year's recession, others have been created – 6.6 million in America alone since the start of the pandemic. Many want some of that extra attention. It's unimaginable these days to run an online consumer business without targeted ads, notes Bernstein's Mark Shmulik, a broker, just as it was once unthinkable to run a business without a store. A larger share of these companies' budgets will be spent on Facebook and its fellow ad-tech giant Google, says Mr. Shmulik. Some administrators call it "the new lease".
Facebook has added more than 2 million renters since the start of the pandemic. It is almost certain that it will add more as economies reopen and digital ads, which already make up 60% of total advertising spend in America, will continue to dent TV and other traditional media. The impact of Apple's new tracking opt-out, which four out of five iPhone users have already embraced, according to Flurry, a data company, won't be clear until the next round of quarterly results in October, notes Evercore's Mark Mahaney. ISI, an investment bank. But even if that makes Facebook's targeting a little less effective, it will still be at least as good as that of its competitors, he predicts. And even if on July 23, American trustbusters got another three weeks to redo a lawsuit against Facebook, which was dismissed last month for lack of evidence, they will struggle to prove that the company is a social-networking monopolist according to. current competition law. For all the anti-tech talk in Washington, DC, this is unlikely to change as long as Congress remains divided.
The biggest threat to Facebook's continued success, which has long worried Mark Zuckerberg, its co-founder and CEO, is that the virtual masses tire at the end of its applications and move elsewhere, dragging advertisers with them. Over the past couple of years, a new generation of social media has emerged that could do just that. Although Facebook's share in American digital advertising has continued to grow in recent years, its global social media advertising has been declining since 2016. Challengers range from specialists like Clubhouse and Discord, two audio-chat services, to Snapchat. and TikTok, which more directly address Blue and especially Instagram. TikTok fans in America now spend more than 21 hours a month on the video app, compared to less than 18 hours users spend on Blue, according to App Annie, a market research firm.
In the past, Facebook could have cornered the smaller rivals, as it did with Instagram. With the trustbusters watching his back, he is placing a series of big bets instead. The first is on the "creator economy", which allows people to make money with digital works such as videos or newsletters. It is an extension of its advertising business, but where it has fallen behind its new rivals. TikTok and YouTube, in particular, have been better at attracting creators who keep users glued to their smartphone screens. In April, Facebook announced that it was developing new audio features, including Clubhouse-like chat rooms where listeners can advise artists. In June, he launched Bulletin, a newsletter hosting service similar to Substack, which popularized the genre. The following month, Zuckerberg promised to invest $ 1 billion for the creators of Blue and Instagram by the end of next year (without specifying what form these payments would take).
Facebook's second bet looks beyond e-commerce advertising. It already hosts 1.2 million online stores on Blue and Instagram. This puts it in the same league as Shopify, a fast-growing rival to Amazon, which has 1.7 million. A month ago Facebook launched a new way for shoppers to virtually try on clothes. He also plans to link his "Shops" offering with Marketplace, his current peer-to-peer exchange service, and WhatsApp, which Facebook wants to transform into a vehicle for chat-based "conversational commerce", the latest trend. of online shopping. Later this year he would like to gradually introduce a version of Diem, his controversial cryptocurrency (formerly known as Libra), which would bolster his payments infrastructure.
For now, Facebook has waived seller commissions, but they could add a few billion dollars to its revenue as early as next year. In addition to bringing in non-advertising revenue, an ecommerce business would also help the company with its tracking problem. As shoppers spend more time and leave more data on its platform, the inability to follow them to the rest of the web becomes less important. Shmulik expects the e-commerce landscape to fragment in such walled gardens, each combining shopping and advertising, and run by a tech giant.
METAMORPHOSIS
Zuckerberg's biggest gamble concerns the metaverse . When he spent $ 2 billion to buy Oculus, a manufacturer of virtual reality (VR) equipment in 2014, many thought he was buying a toy. But in recent years Facebook has made further acquisitions related to VR, most recently BigBox VR, the developer of “Population: One”, a shooter game similar to “Fortnite”. This gives Facebook control of a hardware platform for VR and its sister, "augmented reality" (AR), which serves users digital information as they examine the real world through smart glasses and the like.
And as with e-commerce, part of Facebook's logic could be to create strategic sovereignty by decreasing its reliance on the whims of hardware manufacturers like Apple. The potential reward is great. Sales of Oculus headphones contributed approximately $ 1 billion to Facebook's revenue last year. If the technology continues to improve, VR and AR are the obvious next phase of video gaming, which has become a sector with a global turnover of 180 billion dollars.
Mr. Zuckerberg's ambitions don't stop there, however. He doesn't see the metaverse, which now has its own division within the company, simply as a place to enjoy games or other immersive entertainment. Instead, he imagines it as a virtual space where people live and work, in keeping with a dream that geeks have cherished since 1992, when the term metaverse was coined by Neal Stephenson, a science fiction author. In five years, Zuckerberg said, he would like Facebook no longer seen primarily as a social media company, but as a metaverse company.
This would make Facebook cool again. It would undoubtedly also invite greater scrutiny from critics concerned about the power of the company. If users seem to be about to spend 35 hours a week immersed in its virtual world, rather than 35 minutes a day, this should prompt regulation that really bites. For now, the metaverse is encouraging something Zuckerberg fears most: competition. Others who are considering the field include video game companies like Roblox and Epic Games, as well as tech giants Apple, which is said to be designing its own AR glasses, and Microsoft, which already sells AR glasses. If Facebook beats them for metaverse supremacy, it will have a lot to smile about. Otherwise, expect big grimaces.
(Extract from the foreign press review by Epr Comunicazione)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/facebook-ha-un-futuro-oltre-i-social-media/ on Sun, 08 Aug 2021 06:11:51 +0000.