Yesterday’s Facebook results showed record profits for the social media giant, but as the company approaches its 15th birthday, there is trouble brewing.
Despite a year that saw the company rocked by scandal, particularly surrounding Cambridge Analytica, the company’s fourth quarter results for 2018 showed record profits.
In the last three months of the year, the company made $6.88bn profits, up from $4.27bn in the same period in 2017. Revenue also climbed 30% to $16.64bn.
The company is now less than a week away from its 15th birthday on 4 February. However according to Dr Ben Marder, Senior Lecturer in Marketing at University of Edinburgh Business School, Facebook needs to face the new reality of itself as a company if it can continue to sustain this kind of growth as it moves towards its 20s.
Positive Facebook results hide a lack of cool
Central to Facebook’s issues is the face that it is simply not the cool new company it was a decade or so ago. The average age of its users has climbed – and according to Marder, that is something the company should embrace.
“Facebook is now not cool. It was cool, but that was in 2012 when the company first floated on the stock exchange – a light year ago in the fast-moving space of social media,” he says.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
“Stop trying to be cool and accept that Instagram and Snapchat are more desirable platforms for younger users (specifically in Europe and America). Facebook would be best served strategically aiming and tailoring its core site at its increasingly older demographic.”
The politics challenge
Another issue is the face that the company has become a key space for political discussion – much of it highly polarized. The company has largely tried to play this down, despite it being a key point in CEO Mark Zuckerberg’s grilling at the US Senate.
But it is now a key reality of how people use the site, and if Facebook is to sustain growth, it needs to accept this.
“With great power comes great responsibility. Facebook can’t be short-sighted to the fact their platform has great authority in modern day politics,” explains Marder.
“It must make sure such influence is not undermining democracy through the dissemination of targeted fake news and be more transparent when it comes to the sources of paid-for posts.”
Should the company rethink its advert strategy?
Despite being responsible for much of the company’s record profits, Marder also argues that the company’s advert strategy is harming its ability to maintain users.
“Facebook has lost sight of the reason people use its site, giving too much weight to ads in its algorithm,” he says.
“This is a terrible and unsustainable long-term growth strategy that has proven to cause rapid user decline. It must avoid temptations for short-term quick profitability and instead focus on creating value for its users.”
Innovate to the future
The online world is a very different place than it was 15 years ago, and it will change just as rapidly in the future. If the company can sustain its monumental presence, it will need to respond accordingly, and Marder argues that in this area the company is already taking effective steps, particularly around the decision to add Instagram and WhatsApp integration.
“Continued user-centred innovation is vital. Facebook’s announcement that it is planning to merge messengers on Facebook and Instagram with WhatsApp, shows solid strategic leadership, learnt from analysis of this year’s growth in developing nations and from daily usage statistics globally,” he says.
“People can avoid scrolling through reels of click-bait and ads but they can’t avoid the need to message their friends and family.
“However, the giant remains standing tall, with a huge loyal user base and little competition from others outside the Facebook brand family. Knowing its strengths and weaknesses will undoubtedly make it stronger as they enter even further into the unchartered new land of a social media society.
“Being the leader in this field, there will be major issues to face – such as freedom of speech versus censorship, but in the foreseeable future, Facebook looks set to persevere.”