The Economist May 7th 2022 Business 65Facebook’sretirementplan
“W
hite hot”,a new documentary, traces the rise and fall of
Abercrombie & Fitch, an American fashion label that
soared in the early 2000s before crashing just as dramatically. The
film explores the firm’s obsession with employing a certain type of
staff—handsome, chiselled, white—which led to damaging claims
of racism and sexual harassment. But just as harmful to Aber
crombie was that it became dated. Its lowrise jeans, cropped
tshirts and migraineinducing cologne, “Fierce”, became insepa
rably linked with Americans who came of age around the turn of
the century. The price of being so closely associated with one gen
eration was that the next wanted nothing to do with it.
Facebook, which took off around the same time, may be experi
encing a similar problem. Its millennial identity is embodied in
its 37yearold founder, Mark Zuckerberg, who still wears his col
lege uniform of skinny jeans and hoodie (though these days his
hoodies are bespoke). The social network, which began as a way
for oversexed Harvard undergraduates to rate each other’s looks, is
now seen by youngsters “as a place for people in their 40s and 50s”,
in the words of one leaked internal memo. Investors consider
Facebook unfashionable, too: its parent company, Meta, has lost
35% of its market value this year, including a plunge of $232bn in
February, the biggest oneday drop in stockmarket history.
Some of Facebook’s problems are overstated. With 2bn daily
users, nearly one in three humans, growth was bound to sputter.
Its loss of 1m users in the last quarter of 2021—the firm’s firstever
fall—was attributed to a rise in the price of mobile data in India. A
decline in European users in the latest quarter followed Meta’s
ejection from Russia. Privacy rules introduced by Apple are a more
serious problem, expected to cost Meta about $10bn this year by
making it harder to target ads for iPhone users. But the company is
devising workarounds. In February it said that since September it
had clawed back half of the 15% reduction in its ability to deter
mine ads’ effectiveness. Similarly, it may be better able than most
to absorb the cost of new tech rules being written in Europe. Firms
like Meta “have a cockroachlike ability to find ways to maintain
business as usual”, says Mark Shmulik of Bernstein, a broker.
Yet if these hurdles can be overcome at a price, the ageing of
Facebook’s audience seems inexorable. In rich countries, whichmattermosttoadvertisers, young users appear to be drifting away.
Frances Haugen, a former Facebook executive, made headlines
last year for blowing the whistle on failures of content modera
tion. But her more telling revelation was that engagement among
young Americans had plummeted. In Facebook’s five most impor
tant countries, account registrations for under18s had fallen by a
quarter within a year, she said. Independent estimates corrobo
rate her claims. In Britain 18 to 24yearolds are spending half as
much time on Facebook and Instagram, its sister app, as they were
four years ago, estimates Enders Analysis, a research firm. Mr
Zuckerberg admitted last year that, amid competition from TikTok
and others, Facebook had neglected young people: “Our services
have gotten dialled to be the best for most people who use them,
rather than specifically for young adults.”
In the past, saving the flagship app was Mr Zuckerberg’s priori
ty. After the acquisition of Instagram in 2012, Facebook reportedly
limited its adoptive sibling’s ability to hire staff, out of fear that it
would cannibalise Facebook’s users—“like the big sister that
wants to dress you up for the party but does not want you to be
prettier than she is”, in the words of a former Instagram executive
quoted in “No Filter”, a book by Sarah Frier. Today Mr Zuckerberg
seems willing to sacrifice his firstborn to protect the wider busi
ness. Efforts to attract young people have focused on other apps,
such as Messenger Kids and Instagram Kids (which was shelved
last year). Reels, Meta’s TikTok clone, was rolled out first on Insta
gram. Last year Mr Zuckerberg even dropped the Facebook name
from his company, the better to insulate the business from its
least fashionable brand. Where once Mr Zuckerberg’s obsession
was repairing the ageing Facebook mothership, now he is scram
bling lifeboats in all directions: four new virtualreality headsets
are expected in the next two years, as well as a smart watch.The Face that launched a thousand shops
That is the right thing to do. But it raises the question of what will
become of the world’s biggest social network as it begins to decay.
Oncemighty sites like MySpace endure, like abandoned digital
ruins. Far in the future, will Facebook, too, become a ghost town?
Not necessarily. Young users are unlikely ever to return to Face
book for social networking, which they increasingly do on apps
like Snapchat or BeReal, a photomessaging service that is spread
ing on college campuses. But networking is only one function of
social media. People also use it to be entertained, and increasingly
to buy things. Facebook is losing its appeal as a place to socialise,
but it may reinvent itself as a platform for other activities.
In entertainment, TikTok is well ahead. Meta’s first attempt to
copy it, with Lasso, in 2018, failed. But having proved a hit on In
stagram, where it accounts for 20% of time spent, Reels is building
an audience on Facebook, too. Facebook’s newsfeed is being re
vamped along TikTokian lines, to recommend content suggested
by artificial intelligence, whether or not it was posted by a friend.
Facebook has long run an eBayesque Marketplace, and in the pan
demic launched Shops, to bring more ecommerce onto its own
platform. Its latest earnings call promised investment in a service
to let users send messages to companies through ads.
Abercrombie has dropped its elitist style in favour of “champ
ioning inclusivity and creating a sense of belonging”. Halfnaked
hunks are out, replaced by plussize models in comfy athleisure
wear, and last year revenuewas back to 80% of its peak. Facebook
will likewise never be coolagain. But there is plenty of less glam
orous money to be made.nSchumpeter
What happens when the world’s biggest social network becomes its most doddery?