It’s tough for any firm to stay at the top: either customers get bored of you, the competition catches up or the regulator sticks in their nose and at Facebook it may just be a case of all three, as growth in daily average user stalls and revenue increases begin to slow.
Facebook may also be yet another firm whose business model is perfectly-adapted to helping people cope with the pandemic and lockdowns but may see fresh interest wane as commuters return to offices and consumers look to get out and about again.
“The one-fifth plunge in parent company Meta Platform’s shares, and loss of $180 billion of total stock market value, may seem extreme in response to the loss of one million average daily users when Facebook still has more than 1.9 billion of them and the company still expects sales to grow by 7% year-on-year in the first quarter of 2022,” says AJ Bell Investment Director Russ Mould.
“But a near-$1 trillion price tag for the company leaves little room for disappointment, especially as that figure represents more than 20 times forecast profits for this year. That lofty valuation could look even more exposed if these fourth-quarter numbers suggest that demand for Facebook may be reaching saturation point.
“After all, the platform has 1.9 billion daily average users and 2.9 billion monthly active users.
“The globe’s population is eight billion and around five billion of those have reliable internet access. Facebook already reaches 2.9 billion of them and of the other two billion more than half are Chinese, where the platform is still banned after 2009’s initial embargo.
“That means the Facebook platform already addresses three-quarters of its available market, so there isn’t a lot more to go for – and competition such as TikTok, or video streaming services, or even getting off the sofa and taking some exercise, going to work or meeting friends in person could all yet catch up with it.”