We're Watching Facebook Die
We're Watching Facebook Die
Like this newsletter? You should listen to the Better Offline episode! In the first quarter of 2024, Meta made $36.45 billion dollars - $12.37 billion dollars of which was pure profit. Though the company no longer reports daily active users, it now uses another metric: “family daily active
In the first quarter of 2024, Meta made $36.45 billion dollars - $12.37 billion dollars of which was pure profit. Though the company no longer reports daily active users, it now uses another metric: “family daily active people.” This number refers to “registered and logged-in users of one or more of Facebook’s Family products who visited at least one of these products on a particular day.”
This quiet, seemingly innocent change to how Meta reports growth is significant insofar as it will no longer have to report its Daily Active or Monthly active users, meaning that the only source of truth in Meta’s growth story is a vague growth metric that could be manipulated to mean just about anything. Three billion “daily active people” across Meta’s “family” combines WhatsApp, Instagram, Facebook, Facebook Messenger (which I’m confident it counts separately), Oculus, and Threads.
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So a company that made 12 Billion in profit in one quarter is dying because it's growth has slowed down/plateaued?
It is more that they are not growing, and that means dying in their business model. By not reporting an accurate metric of user engagement, they are hiding the stagnation or loss. Background logins from apps are likely also hiding the real picture of user engagement. Without active user engagement they lose their revenue, data harvesting and advertising.
So there are signs that they are in a downturn, which will lead to irrelevance and failure.
Once upon a time, after growth companies would shift from a growth stock to a stable stock. Instead of telling wall street "you can make money here" it would mean "you can keep your money relatively safe here". We apparently don't do that anymore. Seems like it would have been perfect for them.
That would work if they had a stable business model and produced something everybody needed or wanted, like diapers or alcohol. Their entire business model requires they keep users engaged and user count growing.
People will leave Meta the more Meta tries to make more off of a stagnant userbase, which will death spiral.
For sure, they don't know how to be a stable revenue, or how to retain users. So we get this clusterfck
"like diapers or alcohol" lol. That resonates to me as a parent
we used to call that 'value investing' and get rewarded with reliable dividends. useful during periods of high interest rates, which stunted growth.
I think you're reading more into that than there is.
Do you still use Myspace?
No, and never did - but I don't understand your point. Facebook started only a year after Myspace did.
Astounding, isn't it? That's publicly traded companies for you. The company's objective is to keep its stock up and up and up. That means shareholders must want to keep buying the stock, which in turn means that the company must demonstrate that its value will keep growing, so that by buying the stock today the shareholders will get a positive return tomorrow.
Of course, the universe is finite and no growth is forever. The end state for such companies is not bankruptcy, at least in the immediate, but, more or less, the IBM fate: a previously uber-dominant mastodon whose market capitalization is now worth maybe one tenth of its modern competitors. The fact that it's still turning a profit is only secondary: none of the big tech shops want to be the next IBM. Their executives are, after all, mostly paid in stocks.
And that's how you end up with companies that are making amounts of revenue you and I can't even comprehend flail in a panic like they're on the edge of the precipice whenever the technological landscape shifts.
It's both fascinating and remarkably dumb.
Since it has shareholders, the only way for it to stay in business is ever-increasing growth. Profit themselves aren't enough. It needs to grow faster and faster so that dividends keep increasing, which is the goal.
Dividends aren't really the goal for most investors. It's stock prices they care about.
traditionally a stock price is the net present value of all future dividends. just like a home price is the net present value of all future rent payments. of course its all off the rails now due to extended periods of minimal interest rates and dollar cancer.
What? The stock price is based on the valuation of the company, not future dividends. Many stocks don't pay dividends at all, or do so rarely.
Similarly, a home's price is the market value of the home, not how much the rent/mortgage payments would be.
the valuation of a publicly traded company is traditionally the future dividends of outstanding shares. stocks that dont pay much dividends are counting on a growth strategy, capturing market share.
again with the homes, the market value of the home is traditionally based on what future revenues can be extracted out of it.
'the price is the value' should be based on something other than bigger fools.
Oh it's definitely dying.