Facebook faces a "perfect storm" of challenges that will determine its future

Late last year, Facebook was less popular than other online platforms. This is a setback for a company that wants all things to everyone.

Facebook faces a "perfect storm" of challenges that will determine its future

Facebook had a terrible week.

Meta, the parent company, revealed a significant revenue shortfall in its fourth quarter earnings report. This was in spite of Wall Street expectations . The challenges triggered by Meta's multibillion dollar investment in its augmented reality "metaverse" prompted a wave price volatility on Thursday. Facebook closed down 26 percent after losing approximately $230 billion in market value , the largest-ever one-day loss for a U.S.-based company.

Early Friday, Mark Zuckerberg lost $30 billion due to the decline.

Meta remains a formidable juggernaut. The Menlo Park, California-based company claimed a profit of $10.3 trillion in its final three months in 2021. However, this is only 8 percent less than the same period in 2020, and lower than Wall Street analysts expected.

Zuckerberg released a statement Wednesday citing several problems its flagship app faces, including "a shift towards short-term video," which Facebook shares with TikTok, Snapchat and other video-based platforms.

Snap's earnings results in the third quarter of 2021 are quite different from Facebook's. The company reported its first quarter profit as well as an increase in full-year revenues to $4.1 billion. Snap shares rose 63 percent on Friday after the announcement.

Karen North, professor of digital media and social media at University of Southern California, said that "they have a perfect storm of all of their challenges coming together simultaneously."

Facebook's story has been one of unstoppable and seemingly endless growth for at least a decade. This week, the company announced that its flagship app had lost approximately a million users in the last quarter of 2021.

Meta added users to its suite of apps including WhatsApp and Instagram. The total number of users is now at 3.6 Billion, an increase of 9 per cent over the quarter 2020.

The decline in Facebook users speaks volumes about the power and flexibility of Facebook, a social media platform that has been omnipresent in internet culture for almost two decades.

North mentioned Facebook's "waning enthusiasm” among certain groups, including teenagers and young adults. Some of these people either left Facebook to join other platforms or left the platform altogether. There is a twist to this story: While Facebook is a strong platform for connecting friends and families, it is not the only one in this environment.

"The ability to communicate with people cheaply has also grown elsewhere." North stated that Facebook does not have this ability as much as it used to.

In the past, Facebook has been able to thwart competitors through acquisitions. In 2012 , it bought Instagram and then purchased WhatsApp two years later at a staggering $19billion . Both companies quickly expanded their user bases. WhatsApp had 450 million users at the time of acquisition and was growing at 1 million per hour.

Facebook made mistakes, but social media users are fickle. Numerous scandals surrounding its handling of user data, as well as accusations that it was a place for hate speech, have prompted movements to #DeleteFacebook over the years. Congress summoned Zuckerberg to testify on these issues and many more.

This is not to mention the simple magnetic power of apps that are capturing the zeitgeist. According to Sensor Tower, TikTok was launched in the U.S. in 2017, and had overtaken Facebook and other popular video apps in terms of user downloads by 2018. TikTok was downloaded over 2 billion times by April 2020. This added 315 million downloads to the app's first quarter and secured the best quarter for any app (, the firm stated).

North mentioned that the most significant part of the "perfect Storm" is the hammering Facebook has suffered as a result privacy updates Apple made. These privacy updates have limited the ability of social media networks to target ads to iPhones. Meta CFO Dave Wehner stated Wednesday that the company expects this change to reduce ad sales by $10 billion in 2022.

Wehner stated this week on an earnings call, "It's quite significant headwind."

North stated that Meta was so badly affected by Apple's privacy policies because Facebook is the platform for advertising for many businesses.

North stated that Facebook helps its customers to sell ads -- not just on Facebook. Because of the changes at Apple, Meta's status as an ad platform for many other businesses and partner platforms suffered so much. It is harder to target users online and follow them.

It remains to be seen how Meta will weather the storm. The company made it clear that it will continue to focus on its long-term initiatives, such as building its metaverse business and products. The bigger question is: Can Zuckerberg & Co. keep Facebook relevant in the future?