Touchy-Feely

It's Tougher Than Ever to Gauge Facebook's Popularity

It's hard to plug meaningful engagement into a spreadsheet.
Photographer: Mohammed Abed/AFP/Getty Images

There's an evolving mystery about Facebook: How are we supposed to measure its popularity now? 

On Wednesday, Facebook initially spooked investors by disclosing the slowest growth rate of daily users in its history and a 5 percent decline in the amount of time people spent on the social network in the final quarter of 2017. The company's stock price fell at first. 

CEO Mark Zuckerberg had already warned that his decision to shake up Facebook's news feed to emphasize "meaningful social interaction" and "time well spent" was likely to dent some measures of engagement, or the amount of time people spend scrolling through posts, watching videos, clicking "like" and so on. 

Popularity Contest

In the fourth quarter, Facebook posted its slowest-ever growth rate in daily users

Source: Bloomberg

Note: A daily user is a registered Facebook user who logged in and visited Facebook or Facebook Messenger in a given day. Facebook's quarterly figure is an average of daily users in the last month of the quarter.

It's worth noting that Facebook's latest numbers don't yet reflect the full impact of news feed changes, which Facebook announced last month. During the fourth quarter, the company said it made other tweaks to Facebook's formula that hit time spent, including changes that reduced the spread of viral web videos. 

Still, this mix of information makes me wonder whether Zuckerberg's recent warnings about decreased engagement because of news feed changes were a convenient cover for an existing trend of people using Facebook less. As Sarah Frier showed in her article about Facebook's thirst for luring back users, even before Zuckerberg's 2018 resolution to "fix" Facebook, the company already seemed concerned about its users tuning out. 

Facebook is telling investors not to worry now. On a conference call with analysts on Wednesday, executives said the first ever decline in daily users in the U.S. and Canada wasn't an "ongoing trend." Facebook also didn't change its revenue growth forecast for 2018, which indicates the company is confident its advertising business will ride out these changes. Facebook's stock reversed its initial decline after those comments. 

But Facebook still hasn't answered how investors or other outsiders should gauge the health of a social network that is now focused on quality over quantity. "Time well spent" is not as easily quantifiable as time spent.

Facebook's advertising business will remain strong for a while no matter how much people use the social network, but the decline in engagement may be an early sign of trouble. If people are permanently hanging out less on Facebook, that could eventually weigh on the company's financials.

What, Me Worry?

Facebook has warned its revenue growth would start to slow by now. It's not much of a slowdown, though.

Source: Bloomberg and Facebook

One stock analyst asked Zuckerberg how he would gauge success now. His answer: "The thing that we're going to be measuring is basically the number of interactions that people have on the platform and off because of what they're seeing that they report to us as meaningful."

Good luck plugging that into a spreadsheet. No doubt Facebook won't be disclosing this user self-reported "meaningful interaction" score, or whatever it might be called. (As a side note, it's remarkable that a company as data-obsessed as Facebook would gauge success based on qualitative user surveys.) Another analyst asked whether Facebook could quantify the share of users who actively interact on the social network in the way the company is now emphasizing. Executives wouldn't say. 

That leaves everyone with little ability to judge how the company is doing as it tries to shift people from aimless scrolling through Facebook to what it considers more productive uses of their social media time. Let me know if you come up with a time-well-spent metric. We all need it.

A version of this column originally appeared in Bloomberg's Fully Charged technology newsletter. You can sign up here.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Shira Ovide in New York at sovide@bloomberg.net

    To contact the editor responsible for this story:
    Daniel Niemi at dniemi1@bloomberg.net

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE