Betrayed, criticized, successful – Facebook has the money to reinvent itself

Facebook’s sales in Q3 2021 grew YoY by 35 percent. For the company, however, a cost-intensive and massive shift is imminent, towards AR and VR as well as the focus on young users.

What’s next for Facebook The social media empire seems to be at a crossroads. A name change for the entire group – which includes WhatsApp and Instagram, Oculus and Messenger – was announced for this week. Will CEO Mark Zuckerberg’s company be called quite differently in the future, maybe Meta, Virtual or Horizon? It is clear that Facebook would like to focus more on AR and VR and its own Metaverse area in the future. After the launch of the Horizon Workrooms in August 2021, the investment in this department is expected to rise to over ten billion US dollars this year. Facebook sees the “next generation of online social experiences” in the Metaverse and explains in current quarterly report for Q3:

We are committed to bringing this long-term vision to life and we expect to increase our investments for the next several years.

The company has enough money at its disposal for this development after once again significant sales and profit growth. You could almost forget that Facebook is in one of the greatest crises in its history.

Facebook: The good numbers are tarnished

A sober look at Facebook’s business figures shows: The company is growing and growing. Revenue for the third quarter of 2021 is around 29 billion US dollars, a growth of 35 percent compared to 2020. The profit also rose by 17 percent YoY and is just under 9.2 billion US dollars. Costs and expenditures rose just as strongly as sales, by 38 percent to 18.6 billion US dollars.

In addition, 1.93 billion people are now active on Facebook every day and 2.91 billion a month. Looking at the entire Facebook family, the figure is 2.81 billion a day and 3.58 billion a month.

We made good progress this quarter and our community continues to grow. I’m excited about our roadmap, especially around creators, commerce, and helping to build the metaverse,

explained Mark Zuckerberg. It remains to be seen whether the increase in users and sales would have been stronger if Facebook hadn’t had to cope with the biggest crisis since Cambridge Analytica. The numbers are unparalleled anyway. However, Facebook is currently surrounded by problems. The fact that the company’s own services were down for hours at the beginning of the month – which, in addition to user displeasure, may have led to immense losses in advertising income – is perhaps the least significant.

Rather, the public is concerned with a series of information on scandals surrounding the social enterprise, which the whistleblower Frances Haugen presented to the Wall Street Journal for publication. The so-called Facebook files revealed, among other things, that Facebook knowingly promotes the well-being of the user behind profit ideas and that there was evidence that Instagram had toxic consequences for teenagers, but that these had not been published in full. Facebook itself had recently tried to downplay the scope of these reports and to question the credibility of Frances Haugen. The announced name change could also be a kind of smoke candle.

Now more focus on the young users

While Instagram and WhatsApp are widely used and accepted by young users, Facebook has long since ceased to be popular with younger social users. Gen Z in particular (especially in the USA) is more likely to rely on TikTok and Snapchat. But Facebook wants to change that in the long term. The plans around the Metaverse should help (after all, Snapchat is so popular with teenagers because of the many AR filter options). While plans for an Instagram Kids app were initially shelved in the course of the Facebook files, there have also been rumors in recent months that Facebook might even want to convince toddlers of its own platform.

This approach was criticized above all by youth activists: inside, by return of post, sharply. Regardless of this, however, the social network would like to rejuvenate the user group as a whole. in the Earnings Call for the third quarter of the year, Mark Zuckerberg explains:

One aspect of this is giving all our apps the goal of being the best services for young adults, which we define as ages 18-29. Historically, young adults have been a strong base and that’s important because they are the future. But over the last decade, as the audience that uses our apps has expanded so much and we’ve focused on serving everyone, our services have gotten dialed to be the best for the most people who use them rather than specifically for young adults. And during this period, competition has also gotten more intense, especially with Apple’s iMessage growing in popularity and more recently, the rise of TikTok, which is one of the most effective competitors we have ever faced. So we are retooling our teams to make serving young adults their north star, rather than optimizing for the larger number of older people.

Part of the restructuring is the subsidiary platform’s strong focus on popular video formats such as reels. In the summer of 2021, Instagram CEO Adam Mosseri had already declared: “Instagram is no longer a photo platform”. According to Zuckerberg, reels are becoming as important on Instagram as the story format. In addition, videos and reels are to become even more of a focus on both Instagram and Facebook.

Further imponderables are on the horizon

For Facebook, with all the positive developments around users and sales, the time of doubt is likely to persist. Not only is the company exposed to various antitrust investigations. The Federal Trade Commission recently filed a new lawsuit in the USA, which calls for nothing more than the break-up of the group. Facebook’s market power is so immense that scandals like Cambridge Analytica cannot harm the company when it comes to user numbers. History seems to repeat itself this year.

Financially Facebook lawsuits and possible fines are likely to harm, however. This also applies to an inhibition of the advertising business due to the introduction of Apple’s App Tracking Transparency (ATT) in spring 2021. The corona pandemic also plays a role in the fact that sales expectations for the fourth quarter are only 31.5 to 34 billion US dollars .

Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple’s iOS14 changes, and macroeconomic and Covid-related factors,

it says in the earnings call. The fact that Facebook is possibly defending itself against the restrictions imposed by Apple’s ATT with not entirely legitimate means now suggests an extension of the lawsuit. Various US attorneys general have been suing Google since 2020 because there were secret agreements with Facebook to maintain market power in the digital advertising market. Google is also said to have helped Facebook to identify users on iOS despite Apple’s data protection extensions. Facebook considers the details of the complaint to be inaccurate and the allegations baseless. This assertion will not detract from the criticism of the company. In a company that is much underestimated, but whose platforms are used by billions of people.

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