TikTok is eating Facebook from the inside
WASHINGTON, April 27 (Reuters Breakingviews) - Last year, Facebook had a TikTok problem. This year, it has several. The Chinese-owned video app is eating Mark Zuckerberg’s social network from the inside, first by luring its users and now by challenging Facebook as a news source too. One way that’s showing up is in slowing revenue and barely-there user growth. If Zuckerberg wants to beat TikTok, he’ll have to quickly copy it.
Meta Platforms (FB.O), Facebook’s parent company, said on Wednesday that revenue grew 7% year-on-year, the slowest pace in about a decade. Facebook’s daily active users grew less than 2% from the end of 2021. The shares rose 15% in after-hours trading, but that’s because much damage had already been done. Meta took a beating read more in February when it partly blamed TikTok for Facebook’s first quarterly decline in user growth. The stock is still down about 40% this year, double the fall in the Nasdaq 100 index.
TikTok, being privately held, doesn’t disclose such numbers – but they’re likely to be heading in the opposite direction. It had almost 1.6 billion global monthly active users in the first quarter, less than Facebook’s 2.9 billion but roughly a 45% jump from a year ago, according to Data.ai.
One reason is content. Its videos are compelling enough that TikTok viewers send content creators quasi-cash gifts. In the first quarter, users doled out more than $840 million on TikTok, a record for any app or game, Data.ai reckons. In the fourth quarter of 2021, it was the first app to surpass games like "World of Warcraft" and "Genshin Impact" in terms of consumer spending.
A new threat is news. Last September, Zuckerberg’s network was a regular news source for 31% of Americans versus just 6% for TikTok, according to a Pew Research Center report. Russia’s invasion of Ukraine in February – which brought TikTok a host of user footage from that country – changed that dynamic. Views of #Ukraine-tagged posts grew from 6.4 billion on Feb. 20 to currently about 40 billion, according to TikTok. In March, the White House briefed about 30 app influencers about the war.
Facebook has already been trying to ape its upstart rival. Its own video feed, Reels, launched last September. It may have to go faster. About 37% of monthly active Facebook users are also on TikTok, and it’s 51% for Meta’s photo-sharing app Instagram, according to Cowen research. Imitation isn’t flattery – it’s self defense.
Follow @GinaChon on Twitter
(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
CONTEXT NEWS
- Facebook owner Meta Platforms on April 27 said revenue for the first quarter of 2022 was $27.9 billion, a 7% increase from the same period a year ago. Analysts expected revenue of $28.2 billion, according to Refinitiv.
- Facebook had almost 2 billion daily active users at the end of the quarter, roughly 31 million more than the preceding three-month period. Its average revenue per user fell to $9.54, from $11.57 in the fourth quarter of 2021.
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