Growth despite allegations: the market power of social media groups

To analyse

Status: 27.10.2021 12:44 p.m.

Despite all revelations and allegations, the large social networks are expanding their user numbers. Practice shows: Only data protection requirements limit the economic success of Facebook and Co.

By Marcus Schuler, ARD Studio Los Angeles

There are two truths that become clear this week when looking at the big social media corporations: On the one hand, they can damage societies, they can even divide them. At the same time, however, they are being used by more and more people, no matter how severe and disastrous the criticism of the company may be. The best example here is Facebook, which now reported 3.58 billion monthly users across all offers – in other words: Facebook, WhatsApp and Instagram. In a year-on-year comparison, this is an increase of twelve percent.

The social network co-founded by Mark Zuckerberg is only stumbling a little in terms of income. Third quarter revenues rose 35 percent to around $ 29 billion, but were well below expectations. The reason is significantly slower growth in the ad market. Analysts reckoned with half a billion more. Facebook’s sales forecast of $ 31.5 billion to $ 34.0 billion for the current quarter was also disappointing.

Impact of Apple’s privacy policy

Senate hearings or series of articles accusing Facebook of putting its profit above the safety of its users are not responsible for the slower growth in the advertising sector. It is probably our neighbor Apple who can be blamed for this development. Because the iPhone manufacturer had the guts in the spring and tightened its data protection settings for social media offers such as Facebook. Since April, anyone who offers apps in the Apple ecosystem has to obtain permission from users to track their behavior. In the case of Facebook or Instagram, fewer and fewer Apple users seem to allow this.

This is exactly what Facebook is currently noticing when it scolds its Silicon Valley neighbor. Similar complaints have already been heard from Snap, a smaller social network that is particularly popular among young people, which had temporarily lost up to a quarter of its market value last week. Here, too, Apple’s strict data protection requirements made themselves felt in cash.

Record sales for YouTube

Other corporations, on the other hand, appear to be immune to the consequences of Apple’s data protection regulations. The video platform YouTube, which belongs to the Alphabet Group, is a splendid example of this. While top managers from YouTube, Snap and TikTok had to answer questions about child safety before the US Congress on Tuesday, YouTube released new record sales: the video platform earned 7.2 billion dollars in the past quarter through the sale of commercials. A year ago that figure was five billion dollars. This corresponds to an increase of 43 percent.

Spicy detail from the congressional hearing: YouTube is the only company on that day that refuses to provide internal research on the psychological well-being of adolescents. Alphabet CFO Ruth Porat told analysts that the changes to Apple’s iOS 14 operating system had only a modest impact on YouTube sales. Google may have benefited from shifting its advertising business to search. In addition, the search engine is used particularly frequently on the desktop.

In addition, the company has a secret weapon called Android. The smartphone operating system is much more popular than Apple, especially in the rest of the world. Google likes to act as a sham advocate for the interests of its users. In Mountain View, one thing is clear: if you followed the example of your neighbor Apple, you would permanently damage your own business model.

Twitter is less dependent on personalized advertising

The damage caused by the Apple settings is also limited on Twitter. The short message service from San Francisco announced that the effects were less than expected. Twitter benefits from one advantage: the company – unlike Facebook, Snap or TikTok – is less geared towards personalized advertising, but primarily sells branded advertising. The income is therefore also right on Twitter: They rose in the third quarter by 41 percent to now 1.14 billion dollars.

The new quarterly results show: The social media groups are far removed from the political reality in Washington, London or Brussels. Or is politics too far removed from the digital reality of societies? Big tech only seems to be vulnerable to stepping up privacy, as Apple did to its iOS operating system. Everything else – such as statements from whistleblowers, affairs over voting, hate speech, misinformation, human trafficking – does not concern the company on balance.

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