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Facebook’s usage decline should have investors worried — no matter what Mark Zuckerberg says

Facebook CEO Mark Zuckerberg gave investors reason to worry on Wednesday.Win McNamee/Getty Images
In its fourth-quarter earnings report Wednesday, Facebook reported a 5% drop in daily usage of its service.
Company CEO Mark Zuckerberg assured investors that this was actually a good thing, saying the Facebook was focusing on promoting “meaningful interaction” not maximizing the amount of time users spent on the site.
But the drop follows a host of negative publicity for the company and growing concerns about how its site may be promoting addiction and depression.
Facebook’s discussion of the decline in usage raised several red flags – among them, that the company plans to make further changes to its service that could reduce usage further.
How much time users devote to Facebook is a big concern, because advertisers – whose spending comprises nearly all of the company’s revenues – determine where to place their ads in part based on where their target users spend their time.

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Facebook investors had good reason to be concerned about the sizeable drop in usage of the social network in the fourth quarter – no matter how reassuring CEO Mark Zuckerberg tried to be about it.

In announcing its holiday period results Wednesday, the tech giant revealed that usage of its service declined by an average of 50 million hours a day. That’s a 5% drop, Zuckerberg noted on a call with investors and analysts, linking it to recent changes the company made to what it shows users in their news feed.

But Zuckerberg argued that the decline was actually a good thing. The company is focusing on promoting meaningful interactions with users, not on the gross amount of time they spend with its service, he explained.

“By focusing on meaningful interaction, I expect the time we all spend on Facebook will be more valuable,” Zuckerberg said on the call. “I always believe that if we do the right thing, and deliver deeper value, our community and our business will be stronger over the long term.”

Zuckerberg may be right that by giving more prominence in users’ news feeds to posts from their friends and family members and reducing the number of videos and news stories from publishers and other organizations, Facebook may become more valuable for its users. Even if users spend less time overall with the service, they may end up interacting with their friends and family members on it more often.

 

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