TikTok is “devouring” Facebook from the inside


TikTok

As of 2021, TikTok was a problem that Facebook could not solve. Well, 2022 is no different, in fact, the problem has been “escalated” this year. Recently, Reuters claims that TikTok is “devouring” Facebook from the inside. The company is not only sucking away Facebook’s young users but also starting to challenge Facebook’s new media dominance. Reuters’ interpretation is not sensational. In the latest first-quarter earnings report, the performance of Facebook’s parent company Meta gave the market mixed results.

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The good news is that Facebook’s daily active users hit 1.96 billion in the same period. This is a year-on-year increase of 4%, which was better than investor expectations. Worryingly, Meta’s revenue was $27.908 billion, an increase of 7% year on year, but the growth rate fell to the lowest level in 10 years of listing.

After the news was announced, Meta’s stock price soared 19%, but the media generally believed that this was just an oversold rebound. Looking back at the last earnings call, Facebook user growth stalled for the first time, surprising everyone. CEO Zuckerberg even blamed rival TikTok in part. Since then, Meta’s share price has been falling all the way.

Meta’s share price is now nearly half from the year’s highs. Shares in the company were down 48% from the start of the year as of the previous session, far underperforming the broader market (down 12%). On the other hand, although TikTok is not listed and cannot be measured by market value, its development momentum and Meta are polarized.

TikTok’s active users are soaring

TikTok has nearly 1.6 billion monthly active users in the first quarter of 2022. Although the absolute number is not as good as Facebook’s 2.9 billion, the growth rate hit 45%. This is a big leap and Facebook is not very comfortable with it.

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One reason TikTok is a headache for Facebook is that its content is high-quality. Users are willing to pay for it. According to Data.ai data, in the first quarter of 2022, consumer spending on TikTok ranks first among all major apps and games in the world.

On the other hand, TikTok has also challenged Facebook’s new media hegemony. In order to defeat TikTok, Meta pinned its hopes on its own short video product Reels. Well, Reels is basically a “remake” of TikTok.

In this earnings call, Zuckerberg said that Reels will be one of the three main growth engines for Meta in the future. “In the first quarter of this year, the growth of short videos was very fast, and users spent 20% of the time on Reels on Instagram. The company will put more effort into Reels.”

But Reels is still struggling to reverse the loss of Meta users. According to a survey by investment bank Cowen, about 37% of Facebook users are also using TikTok. As for Instagram, 51% of its users are also on TikTok.

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