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A Wall Street analyst claims that Facebook (a.k.a. Meta) could have issues in achieving further growth moving forward in the post-COVID business or financial environment, especially with the emergence of TikTok, although it’s a mixed bag.
Brad Erickson, the RBC Capital Markets managing director implied, among things, that the platform that banned ex-President Donald Trump may encounter challenges in obtaining further growth in what might be considered a market correction based on changed circumstances.
“At a certain point, Facebook has a little over one out of three human beings on Earth as platform subscribers, it’s a little challenging to grow users beyond those levels,” Erickson noted over the weekend.
Seemingly speaking for the Fox Business panel, “Barron’s Roundtable” host Jack Otter suggested that Facebook has lost user engagement to TikTok.
“A few things stack up here,” Erickson explained at the beginning of the discussion. “Number one: We’re coming out of the pandemic, right, and there’s clearly is an e-commerce hangover, whether it’s Netflix or Carvana, some of these companies that were huge COVID beneficiaries. What we are seeing out of them in 2022 is that growth is gonna be a little bit slower,” he explained during a panel discussion on Fox Business.
Watch the segment embedded below and draw your own conclusions:
(Video: Fox Business)
“Secondarily, Facebook obviously has lost some signal from Apple just in the last nine to 12 months. And that is a headwind. Advertisers not being as willing to spend as they used to be because they can’t get as good a targeting.
“And the last one I’d mention is obviously, everyone’s been talking about TikTok, the last six or nine months. I think TikTok is ‘stealing’ a lot of people’s time and engagement over from Instagram and probably from Snap as well,” Erickson agreed.
Elon Musk says ‘woke mind virus’ making Netflix ‘unwatchable,’ causing subscribers to flee https://t.co/olSM6ULhZO
— Jack Furnari (@JackBPR) April 20, 2022
When the “Barron’s Roundtable” host suggested that a subscription model may be a solution for Facebook (or Twitter) to generate recurring revenue and provide a cure for “misinformation,” Erickson pointed out the limitations of the paywall premise.
“You just limit the number of people that are gonna come on the platform. The reason internet platforms historically go from something good to great is because of how pervasive they become, and of course, being inclusive to as many people as possible. You go to a subscription, sure, you can curate that experience more, but inherently, you’re also gonna limit your audience, and that’s not sort of the fundamental basis on which most Internet platforms are built upon.”
In answer to a question from another panelist on the show about whether Facebook-owned Instagram has hit a wall in growth like Netflix, Erickson seemed to suggest otherwise.
“Instagram is absolutely growing. But what I think that what people miss though is that Facebook ‘blue,’ the core Facebook site, is still growing very nicely from advertising perspective as well. Facebook blue has by far the most data, which Meta, the company, is able to leverage that data from Facebook over to Instagram. So from an engagement standpoint, sure, you’re continuing to see more user growth on Instagram, more engagement growth, and so yes, that business should sort of continue to grow,” Erickson stated.
“The problem is that if you have people sort of falling off of Facebook blue at an increasing rate, that becomes the headwind or the crosscurrent, and clearly that’s what Facebook is dealing with,” he cautioned.
Describing Facebook as an “evangelist” for the so-called Metaverse, he added, “I also think that there is a ton of commercial and enterprise applications for the Metaverse that Facebook probably isn’t best situated to deal in. I think what Facebook brings to the table, again, at its core is the audience size. Billions of users.”
Parenthetically, Facebook CEO Mark Zuckerberg reportedly spent about $400 million to help elect Democrat presidential candidate Joe Biden in 2020 but apparently has decided against writing any big checks for this year’s midterm voting.
Zuckerberg-funded nonprofit’s tax returns reveal how donations to Dems helped sway 2020 election https://t.co/2bE561Yme5
— Conservative News (@BIZPACReview) December 20, 2021
Facebook is scheduled to report 1Q 2022 earnings on April 27.
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