Facebook Growth Stalls

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I chat with Michael Yorba of WFN1's CEO Money radio show about this past week's news about Facebook. Transcript below:

Michael Yorba: Welcome back to CEO Money. I'm Michael Yorba. We have Giovanni Gallucci with us right now. He is our digital strategist... Our go-to guy for this. So welcome back to the show, Giovanni.


Giovanni Gallucci: Howdy, Michael.


MY: Alright. You wanna start off talking about what's been going on with Facebook. Let's do that.


GG: Yeah. So Facebook had its earnings call here recently, and great news for investors, they posted yet again market... Record profits, $47 billion I think, year over year. And that's much better than they did in Q4 last year. Some interesting stuff that came out of the call though, was that we expected them to gain a lot more new users on the platform than they have. So I think that they're in a situation where the platform's becoming saturated. And they still had user growth, but based upon what we expected them to do, they're down by about 100,000 users based upon our expectations and based upon trends. So that's number one.

Number two, which is shocking to me, that there's not more news about this, they are down 50 million user hours per day on the platform. So every single day on Facebook, around the world, people are looking at content on the platform 50 million fewer hours per day. That is an astronomical... And granted, got almost 2 billion users on the platform. So user per user, that's not a huge number, but it's certainly not the direction you wanna go in. So when we talk about... [01:44] ____ remember what we talked about last week, with Facebook constricting the amount of organic content on the platform in the newsfeed, from businesses in particular. And now you combine that with the fact that there's less inventory when it comes to time on site for you to purchase ads. What does that do to your ad cost on Facebook? It sends them through the roof, right? 


MY: Well, I'm gonna tell you what it did to their stock today. It put it up $6.63.


GG: Exactly.


MY: To a new high. So Facebook made a lot of money, but it cost me more.


GG: Exactly. And so from a standpoint of where the markets are at, the markets are fine with Facebook squeezing businesses. And I'm the first one to say that, "Look, Facebook is... "


MY: No, no, no, no. The shareholders are fine. [chuckle]


GG: The shareholders are fine with it. Exactly.


MY: The market is not so happy. [chuckle]


GG: Yeah. The market's not. The shareholders are fine with that. And I'll be the first one to say that Facebook can do whatever it wants to. It's funny, 'cause driving over to the station, I sit there and I talk to myself in the car about how we're gonna walk through this. And part of the conversation I have with myself is, "You know what? Mark can do whatever Mark wants. If you don't like it, go play at another playground." And so, for me personally, I don't like most of what Facebook does. But if I don't like it, guess what? I don't have to have an account, which I personally don't. But I manage client accounts on there so I've got to be concerned about what Facebook does to my clients on the platform. So, number one, what that does to me as someone who works with businesses online, is that makes me have to go back to them and say, "Look, I know that we've got 100,000 followers on... That have flat-out said they wanna see your content. Too bad, you're gonna have to buy access to the people that have said they wanna see your content." Number one.


GG: Number two, the price is gonna go up now, because now we've got... We're being hit from two different directions. And the place where the viewership is going down on the platform, is on the video platform. So Facebook, while it's got this kind of internal self-imposed mandate that it wants to crash YouTube, a lot of the area of concern when it comes to what happened in the elections and what's happening with especially the European Union, with them cracking down on Facebook... The unregulated viral video content that flies through the platform, is something that if they don't look at and fix, someone from the outside's gonna do it for them. And of course, we always know that for a company itself, a company always wants to do that before a regulator comes in and decides to do it for 'em. So that's one thing on Facebook.


Moving over to Twitter, we had a news article break last week or about a week ago, about... And it's funny how the New York Times found this one company, I think it's DVM or something like that, who they wrote this big article about this entire industry of creating fake social media accounts and selling those accounts to businesses. As if that was something new. That's been going on for years and years and years. And again, why that comes up to be, bubble up to the top of the culture's consciousness to do something about now, is interesting. But anyway. So federal authorities are looking into this company who was based there. The federal government's looking into 'em now. And again, that's a situation where if you've got people that are using Twitter as a platform to advertise on, and you as an advertiser go to an influencer on Twitter because they have 350,000 users, you think you're getting access to them. I'm sure that it would be interesting to you to find out that 100,000 of those folks were actually fake. Because you're purchasing ads or you're purchasing content, and placing your product or service in that content based upon the number of eyeballs you think it's gonna reach.


So, again, I'm thrilled with the idea that they're gonna clean it up. And I'll tell you that we all have fake followers. Twitter now, because they are now terrified of what the federal government's gonna do to them, they've now actually gone in and started doing some real house cleaning on all these fake accounts that are out there. Because Twitter was motivated to kinda leave them alone and kinda turn a blind eye, because they've been flatlining too. And growth for them, if they can put that in their quarterly earnings calls, helps the perception of the platform. And since this news story came out and Twitter decided to do something about it, I've lost about 10% of my followers on the platform. Because they were fake, they were bots, and Twitter's cleaned them out. I think that anybody that has a Twitter account, unless you just have like 1,000 people that are people that you've met that are real people in business, if you have, say, 2,000 or 3,000 more or above that number of followers, you should look at the number of followers and see how many you've lost. And it's nothing you've done. This is Twitter cleaning house, which is a great deal because you weren't gaining anything really by having the fake followers. And now you're gonna know that the number that you have, are actual real bonafide people.


Ed Baxter: You bring up a really interesting point, two points actually. When you tied the monetization of the Twitter accounts and Facebook accounts to the number of followers for those people who are influencers, you invited people to cheat, first of all.


GG: Oh, yeah.


EB: Second, and when you look at the possibility of these digital monopolies on a global basis, and you talked about some of the things that the governments could do. What are some of the things governments could do to try to bring about maybe, for lack of a better term, a break up, when you think about these companies and the power they have on a global basis to control the opinions and the thoughts of people? 


GG: Well, you asked one thing about what happens with... We live in a very real situation, where say the European Union can pop in and tell Facebook that it's gotta act in some way to make changes. Well, that stuff has already happened to Google in the search space. So the European Union came in with the "right to be forgotten" law, which basically says that, if I am a citizen of the European Union and I find something online that has to do with a criminal background that I might have had, that I have served my sentence or I have paid back society for. That if I go and I find something referencing that in the search engine, not the webpage itself that might mention that, but if the search engine pops up, and if someone typed in the name of a business person and whatever the crime it was that they committed, and it pops up in Google, that business person can go to Google and say, "Remove that. I've served my time. You can't have that... " That's the right to be forgotten. That only happens in the European Union though.

GG: So it can be done where it splits it up. You can't do that in the United States or other countries that don't fall underneath right to be forgotten. So if the European Union comes in and tells Facebook, "You can't accept money," or if it happens in the US, "You can't accept money from somebody for a political ad, that doesn't reside in the country for that political ad [08:47] ____ bought in." Facebook, it'll be a pain in the rear end, but they can split that up and they can make it work in one country and not in another. It's a pain in the rear end, but they can get it done.