Tencent technology news on July 29, social networking giant Facebook has always been regarded as having two faces. Novel coronavirus pneumonia is a dislike face distorted by many people, especially politicians. President Biden Joe recently accused the social media giant of killing people by misleading information about vaccines against the new crown pneumonia, Biden.
The second face of Facebook is a smiling face representing happiness. Users, advertisers and investors can’t live without it. On July 28, when Facebook announced its second quarter results, it ushered in a big smile again. In the second quarter, the company’s revenue increased 56% year-on-year to $29 billion. Although Apple updated the iPhone operating system in April, users can easily choose not to be tracked on the network by applications such as Facebook.
The results that exceeded analysts’ expectations in the second quarter will make Facebook’s revenue this fiscal year expected to exceed $100 billion. Quarterly net profit was $10.4 billion, twice that of the same period last year. No wonder Facebook seems ready to become a long-term member of the corporate club with a market value of more than $1 trillion, which the company joined earlier this year.
So how can a company with a heavy burden achieve such great success? The answer depends on who you ask. Facebook’s main service (its flagship social network, internally known as blue), photo sharing service instagram, instant messaging WhatsApp and messenger are all digital magnifiers of human nature. These mirrors magnify good things, such as neighborhood help during the epidemic, but also amplify bad effects, such as conspiracy theory and quack therapy.
At the same time, Facebook is also an unusual lens for advertisers to pay attention to consumers around the world. If Facebook succeeds in its largest project to date, this double-sided nature may become more obvious, that is, to create a virtual world, metaverse, that combines the 3D digital world with the physical world.
FB advertising business continues to grow
Facebook’s core is a huge advertising machine, which generates 98% of its revenue. According to the estimation of keybanc capital markets, an investment company, blue is the dominant advertising platform in the world, with revenue of about $55 billion last year (Facebook did not publish results by service). Instagram, which was acquired by Facebook for $1 billion in 2012, has now invested $20 billion or more, increasing its share of overall advertising revenue from slightly more than 10% in 2017 to nearly 30%.
Debra aho Williamson, an analyst at emarketer, a data provider, said Facebook’s targeted advertising capability was “very accurate”. Advertisers attach great importance to this: Facebook’s quarterly revenue per user is more than $8, almost twice that of twitter. The company will observe the behavior of users not only in its own services, but also almost anywhere else. This allows it to choose which products to offer to specific users, identify other people with similar interests, and find out whether they have bought something after seeing the advertisement.
Even before the outbreak, this situation was difficult to resist, whether for small companies that did not have enough resources to carry out complex marketing operations (these companies accounted for most of Facebook’s 10 million advertisers) or for major global brands.
The epidemic supercharged Facebook’s machine. According to emarketer, in 2020, American adults in self isolation spent an average of nearly 35 minutes a day on blue, two minutes more than the previous year. This means an additional 10000 years of collective attention. Although some companies closed down or cut advertising spending in last year’s recession, others were born: 6.6 million companies have been born in the United States alone since the outbreak of the epidemic.
Many people want a piece of the extra attention. Mark Shmulik, an analyst at Bernstein, a brokerage firm, pointed out that it is unthinkable to run an online consumer business without targeted advertising, just like there was no physical store in the past. He said that a larger part of the budgets of these companies will be spent on Facebook and advertising technology giant Google. Advertisers call it “new rent”.
In the past 15 months, Facebook has added more than 2 million “tenants”. As the economy reopens and digital advertising (currently accounting for 60% of the total advertising expenditure in the United States) continues to erode television and other traditional media, digital advertising is bound to increase more. Mark Mahaney, an analyst at evercore ISI, an investment bank, said that the impact of Apple’s app anti tracking function will be shown in the third quarter earnings. According to Flory, a data company, four fifths of iPhone users accepted Apple’s new feature and chose to exit tracking.
However, mahani predicts that even if this will reduce Facebook’s targeting efficiency, the company will at least maintain the same good positioning as its competitors. Although the U.S. antitrust authorities have three more weeks since July 23 to reopen the lawsuit against Facebook, which was rejected last month due to insufficient evidence, it will be difficult for them to prove that Facebook is a social network monopoly under the current competition law. Despite calls from Washington to suppress technology giants, such laws are unlikely to change as long as Congress remains polarized.
Emerging social media threats surge
The bigger threat that has long plagued Facebook co-founder and CEO Mark Zuckerberg is that online users are tired of the company’s applications and migrate to other places, which also attracts advertisers to migrate. In the past two years, a new generation of social media has emerged. Although Facebook’s digital advertising market share in the United States continues to grow, its global social media advertising has been declining slightly since 2016.
Facebook’s challengers include professional audio chat service companies such as clubhouse and discorde, as well as emerging giants such as snapchat and tiktok. They compete more directly with blue, especially instagram. According to app Annie, a market research company, tiktok fans in the United States now spend more than 21 hours a month on this short video application, while users spend less than 18 hours on blue.
In the past, Facebook may have acquired smaller competitors, just as it did with instagram. Under the eyes of antitrust regulators, it is now making a series of big bets.
FB places three “bets”
The first bet is the so-called “creator economy”, that is, people make money from digital works, which is an extension of its advertising business, but Facebook has fallen behind in this field. Especially compared with tiktok and Youtube, they do better in attracting creators who keep users staring at the screen.
In April, Facebook said it was developing new audio features, including an audio chat room similar to clubhouse, where listeners can tip performers. In June this year, Facebook launched bulletin, a newsletter hosting service similar to substack. This month, Zuckerberg vowed to pay $1 billion to creators on blue and instagram by the end of next year, but he did not specify the form of payment.
Facebook’s second bet is to focus on e-commerce beyond advertising. The company already has 1.2 million online stores on blue and instagram, which puts it on a par with Shopify, Amazon’s fast-growing competitor. A month ago, Facebook launched a new way for buyers to try on clothes virtually.
The company also plans to connect its “store” service with its existing P2P trading services marketplace and WhatsApp. Facebook hopes to turn WhatsApp into a chat based “conversational commerce” tool, which is the latest product in the field of online shopping. Later this year, Facebook hopes to gradually introduce its controversial cryptocurrency diem, which will strengthen its payment infrastructure.
At present, Facebook has exempted sellers from fees, but they may increase their turnover by billions of dollars as soon as next year. In addition to bringing non advertising revenue, e-commerce business will also help the company solve tracking problems. If shoppers spend more time and leave more data on their platform, it becomes less important to track them elsewhere on the network. Bernstein analyst schmulick predicts that e-commerce will be divided into different walled gardens, each of which combines shopping and advertising and is operated by a technology giant.
Zuckerberg’s biggest bet is related to the metauniverse. In 2014, when he spent $2 billion to acquire oculus, a virtual reality (VR) equipment manufacturer, many people thought he was buying toys for himself. However, in recent years, Facebook has also made other VR acquisitions, including the recent acquisition of BigBox VR, which has developed a shooting game “population: one” similar to fortrite night. This hand is Facebook’s control over VR and augmented reality (AR) hardware platforms. It provides users with digital information and allows them to observe the real world through smart glasses.
Like e-commerce, part of Facebook’s reason may be to reduce its dependence on hardware manufacturers such as apple. The potential prize is huge. Oculus helmet sales contributed about $1 billion to Facebook’s revenue last year. If the technology continues to improve, VR and AR will obviously become the next stage of video games. The industry has grown into an industry with a global revenue of US $180 billion.
However, Zuckerberg’s ambition does not stop there. He does not think that metauniverse is just a place to enjoy games or other immersive entertainment. Now metauniverse has established a special department within the company. Zuckerberg envisioned it as a virtual space for people to live and work, which is consistent with the dream of geeks since 1992. In 1992, science fiction writer Neal Stephenson coined the term metauniverse. Zuckerberg has said that within five years, he hopes Facebook will no longer be regarded as a social media company, but as a metauniverse company.
This will make Facebook cool again. There is no doubt that this will also lead to more scrutiny by critics worried about the company’s excessive power. If users want to spend 35 hours a week immersing themselves in their metauniverse instead of 35 minutes a day, this may lead to more regulation. At present, the metauniverse is encouraging Zuckerberg to worry more about competition. Other companies evaluating this area include video game companies such as roblox and Epic Games, as well as technology giants apple and Microsoft. Facebook needs to defeat them and become the overlord of the metauniverse（ Tencent Technology (reviser / Jinlu)