Irina Ivanova – CBS MoneyWatch
Mark Zuckerberg has a new remedy for what plagues Facebook: ditch older users and refocus the business on serving Gen Z, while encouraging them to purchase virtual items in the emerging “metaverse”.
“We are reorganizing our teams to make serving our young adults our North Star rather than optimizing for the greatest number of older people,” Facebook’s CEO told investors on a call on Monday, setting out young adults such as those aged 18 to 29.
“Over the past decade, as the audience that uses our apps has grown so much, we have focused on serving everyone,” he added. “Our services were designed to be the best for most of the people who use them rather than especially for young adults.”
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Facebook faced stiff competition for young TikTok users, whom Zuckerberg called “one of the most effective competitors we’ve ever encountered.”
At the same time, Facebook’s ad sales, which account for almost all of its revenue, have plummeted thanks to Apple’s latest operating system, making it harder for third-party app developers to track users. from Apple. Facebook opposed Apple’s changes and claimed they would hurt small businesses while giving Apple’s own advertising systems a head start. With most electronics users adopting the new software in late June, these changes were the biggest challenge for Facebook’s revenue growth in the three months of July through September.
During this period, Facebook’s most profitable users – those in the United States, Canada and Europe – became slightly less profitable. The company’s average revenue per user fell about 65 cents in North America, to $ 52.34, and about 70 cents in Europe, to $ 16.50. To counter these changes, Facebook plans to rebuild its ad targeting tools to work with less data, COO Sheryl Sandberg said on Monday.
Facebook said its net income increased 17% between July and September to $ 9.2 billion, from $ 7.8 billion a year earlier. Revenue rose 35% to $ 29 billion, beating analysts’ expectations of $ 24.5 billion. Facebook shares rose 1% on Wall Street on Monday and rose 1% to $ 332.43 in after-hours trading.
Despite the fallout from the Facebook Papers showing that the social media giant sometimes ignored the detrimental effects its platform had on users, Facebook remains a money-making machine for millions of small businesses that depend on it to make money. advertising. Still, Facebook executives have detailed plans to roll out new product lines that will strengthen the company’s advertising dominance.
A $ 10 billion bet on the metaverse
Chief among these new product lines is the so-called Metaverse, which Zuckerberg first discussed in July. Facebook said it plans to spend $ 10 billion to help develop a virtual reality environment that it plans to eventually fill with clothes, tools and other virtual content.
“The metaverse is going to be the successor to mobile internet,” Zuckerberg said on Monday, adding: “Giving a sense of presence, as if you were there with another person – this is the holy grail of the online experience. and social. “
“We hope that by the end of the decade we can help a billion people use the metaverse and support a digital economy worth hundreds of billions of dollars,” he said.
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As it seeks to stay up to date amid signs that young people have moved to other platforms, Facebook is also reportedly considering a name change, according to The Verge. For now, the company has declined to comment on what it called “rumors and speculation.”
The company also plans to split its Facebook Reality Labs into a separate segment starting in the fourth quarter. This business line will include its augmented and virtual reality products as well as associated hardware, software and content. Facebook plans to spend around $ 10 billion on the segment during the fiscal year, he said – an investment that will grow in the years to come.
“It’s important to have a social experience that spans all platforms,” rather than just “a VR social network,” Zuckerberg said. “It needs to work across our family of apps. It has to work on the web, on the phone, on computers. There is a lot of infrastructure to build.