Facebook faces some facts

Investors are dumping Facebook parent Meta Platforms after the social networking company disclosed a quarterly dip in the number of its daily users in the last quarter of 2021. Meta attributed this to competition from video-sharing platform TikTok and messaging services Telegram and Slack, the lifting of pandemic lockdowns, and higher mobile data tariffs in India, its largest market. Executives said the company was focusing on its short-form video feature Reels, and on WhatsApp and Instagram. The going will get tough because these parts of the business are not as lucrative as Facebook's targeted advertising machine. That revenue stream is, in turn, being threatened by Apple changing its iOS marketplace that forces app-makers to seek permission from users before collecting data on which Facebook relies to target its ads.

Facebook's acquisitions of Instagram and WhatsApp have been seen as a diversification strategy against a saturation in subscriber numbers. Now Meta boss Mark Zuckerberg is betting on a more immersive metaverse involving virtual and augmented reality to increase user engagement. Building that business involves revenue flowing in from existing verticals. Reels has large revenue potential. But Zuckerberg admits it has not yet acquired scale. The metaverse is work-in-progress and expensive. The division working on it notched up $3.3 billion in losses last quarter.

Zuckerberg has warned his employees of this eventuality - Facebook will one day run out of people to add. Meta has been trying to squeeze out the last bit of network effect by pushing content at users from people they are not connected with on the platforms. Buying into fresh ideas from outsiders is not an option for a tech giant under antitrust watch.