Remember when we all thought that people gave a shit about our lives? No? Well, allow me to refresh your memory.
Back in like 2005, we got this newfangled thing called ‘social media’ in the form of Facebook. Sure, Myspace, Friendster, and other platforms had existed but they never really took over in the way that Zuck’s Frankenstein did. The secret sauce this time around was the ability to see if that person in your 10 am chemistry lab was single.
Alongside the endless trawling for potential mates, we decided that the world – or at least our ‘friends’ – had to know just how star-spangled awesome we were. Why? Because how else were we going to convince the cute person from chemistry that they should look our way next time we’re doing our morning titrations?
Our personal marketing efforts consisted of terrible statuses and photo albums consisting of dozens, if not hundreds, of photos from random Tuesday nights. It was a wild time. These social artifacts now haunt us as we are reminded of what we said or did 5, 9, or 12 years ago. My ‘On This Day’ notifications are a non-stop stream of horror-inducing cringe.
On Facebook, we were connected to our friends and family with a spattering of random folks who we thought we maybe knew. Sure, you could ‘follow’ an official fan page of a celebrity but in general, we were not connected to folks outside of our immediate social milieu. Then came Twitter.
Twitter was all about following folks you didn’t know. The site tells me that I joined in October 2008 and I can assure you that about 99% of the accounts I follow are run by people I have never met.
If Facebook was your hometown, then Twitter was the city you wished you could move to. Although it was a status symbol – for a very brief moment – to have a large number of Facebook friends, it was nothing compared to making it big on Twitter. I still remember the hoopla that CNN made when they were in a race with Ashton Kutcher (of all people) to become the first account with 1 million followers.
In time, Facebook got disrupted. Instagram became the platform to project personal branding thanks to its ‘quality-over-quantity’ approach. Improvements in iPhone cameras meant that suddenly mobile uploads were on par with traditional point-and-shoot cameras. Additionally, Instagram filters allowed for quick and simple editing that covered up poor photography skills and facial blemishes.
Around the same time, Tinder came on to the market and you no longer needed Facebook to see who was single. In fact, Tinder took things one step further by showing you folks who were actively looking for something. It gave you access to a self-selecting population of single people who fit some criteria that you could set. Initially, it was just an age and distance thing but successor apps like Bumble and Hinge have expanded the universe of filtering criteria.
Facebook got smart and bought Instagram. Fair enough. But despite trying to get its dating service to be a real thing, it lost its user value proposition. Since the mid-2010s the platform’s been flailing around trying to grab onto something to hang its hat on.
To date, nothing has really stuck for them. Outside of riling up emotions amongst Ben Shapiro fans and feeding MAGA shit to the elderly, Facebook is a largely useless platform to most people. That is, except for its Messenger functionality.
In areas with low WhatsApp usage (another Facebook acquisition), Messenger has all your connections in one place. Anecdotally, I’m getting married in the near future and my groomsmen communicate in a Messenger group chat because they’re not all immediate friends with one another to the extent of having each other’s phone numbers. At the same time, I haven’t added a ‘friend’ on Facebook in at least two years.
If we look at Meta’s 10-K we see that Monthly Active Users in the US and Canada – the most mature market for the platform – are allegedly growing at around 5% per year. By comparison, the Asia-Pacific user base has grown 20% in the same period. One should note that across Meta platforms the amount of Asia-Pacific users added in the last year roughly equals the total number of users on the platforms in the US and Canada.
The company notes that its largest geographies of user growth are India, Bangladesh, and Vietnam. These sources of growth are indicative of the general trend that social media platforms follow.
You start off in a lucrative market with relatively high value-per-user acquired. In short, you can make more money selling ad space targeting a single American than a single Bangladeshi. Platforms aim to get as many high-value users as possible and then when that growth starts to slacken you move to the next group of folks in places like Europe, Japan, Australia, and the higher socio-economic cohorts of areas like the Gulf States. When growth slows in these regions you focus on places like India, South America, and parts of Africa. It’s a veritable race to the bottom in terms of potential lifetime value per marginal user.
This analysis is not meant to be America-centric or whatnot – it’s just the reality of the situation. Per capita GDP [in terms of purchasing power parity] in the US is around $69,000. In India, it’s $7,300. America has a population of 332 million while India’s is just shy of 1.4-billion. While India is about 4 times the population, each person is economically 9.5 times less lucrative as a customer. There are more potential users in India than in the US but there are not enough to make up for the higher spending power of the Americans.
The problem at hand here with Meta in general and Facebook, in particular, is that historically social media platforms have been valued by the market based on user size and growth. That approach makes sense when all people are economically equal. Unfortunately for overlord Zuck user growth in less well-off areas leads to diminishing returns. At the same time, you cannot tell me that the average American user of Facebook is as engaged with the platform as newly minted users from Southeast Asia. Eventually, the ‘newness’ factor and its accompanying excitement decline. Sooner or later we all stop posting statuses to the platform.
Another way of looking at the situation is that both user growth and user engagement in mature markets have slowed. The result is that long-time users are of less and less value to the platform because lower engagement means fewer opportunities to display advertisements to them. This ad revenue has to be made up somehow. Therefore, the incentive is to get more users who – being new to the platform – are very active. However, if the market is saturated in the high-income world then you’re going to have to find them in lower-income countries. Each new user is of less potential value to the company meaning that Facebook has to go find more and more users from poorer and poorer regions. At the same time, engagement levels are dropping in decreasingly mature geographies. First, the Americans get bored, then the British, then the Japanese, and so on and so forth.
Let me be clear that this is not just a Facebook problem. This user acquisition pattern shows up in many (if not all) social media platforms. Take for example everyone’s favorite pandemic story of Icarus – Clubhouse. The platform went belly up in North America and Europe. So what did they do? They went looking for users in India. In June 2021, something like 80% of global Clubhouse downloads happened in India. The platform got a shot in its arm and then......splat. Within three months downloads in India were a tenth of their peak.
Or take Twitter – everyone’s favorite digital shithole. The company uses the metric of mean daily active users (mDAUs) to measure its community. Looking at its most recent 10-K you see that in the preceding twelve months the platform added 1 million mDAUs in the United States. By comparison, outside of the US the company allegedly added 46 million users. Twitter does not break down geographies as much as Meta does, but it’s probably safe to say that growth is coming from similar – even if not the exact same – sources. In this case, Twitter is on the hunt for increasing numbers of less economically-valuable users.
A counter to my claim that the expansion of the user base in less-developed countries is a negative sign of corporate prospects is that by being in these locations Facebook, Twitter, et al., will reap the rewards of eventual economic expansion. That’s a nice idea. But you tell me which is more likely to happen first, Pakistan becomes rich or its people get bored of Facebook?
One can look at Meta’s share price this year and see that people are waking up to the likely end of the company’s utility in the years to come. Google’s telling me it’s down about 50% year to date. Why? Because that’s what happens when the growth stock loses the ‘growth’ aspect. The only reason Twitter isn’t down that far is that it never took off in the first place. Meta has tripled since its IPO all those years ago while the band formerly known as the Jack Dorsey Experience sits 10% below its initial price. That’s 1% of nominal decline per year of public market existence.
The short of it here is that we used to think that people gave a shit about what we were up to. In response, we made a lot of content in the form of tweets, statuses, and pictures. In the end, though, we’ve realized consciously or subconsciously that we aren’t that interesting. Or, at least we don’t care enough to tell people otherwise. Sure, influencers are there to fill the content gaps but humans inevitably get bored and look to other avenues for entertainment.
Facebook rose, then we migrated to Instagram, and in time we found ourselves staring at TikTok. In the end, these platforms come and go. The real surprise is that the major ones we have today have been around for as long as they have.
Mark my words, my children will not have Facebook accounts. Not because I won’t let them, but because either they won’t want them or the platform won’t be there to provide them.