The world’s largest social networks blamed recent user declines on abuse crackdowns and a botched redesign, but mounting evidence points to a problem that could prove harder to fix: Social-media use may be reaching its peak.
Facebook Inc.’s core platform added no new users in the United States and Canada in the second quarter and lost one million in Europe – its most lucrative markets. Globally, the company signed up just 22 million new users, its slowest quarterly growth rate since analysts first began tracking the measure in 2011.
Twitter Inc. lost one million active users in the same time period. Snap Inc., maker of photo- and video-sharing app Snapchat, lost three million users in the second quarter, its first decline since going public last year.
Some of the slowdown may be temporary as Facebook and Twitter implement changes to protect their platforms from misuse, and Snap rolls back a redesign that proved wildly unpopular with some of its most loyal users. Yet, longer-term trends point to a troubling reality for those companies and their investors: They may have saturated the market.
Already roughly 70 per cent of adults in the United States and Canada use social media, according to the Pew Research Center, and the growth rate for new users has been slowing for several years.
“People are getting bored with the big social-media giants,” said Jessica Ekholm, research director with technology research firm Gartner. “You’re on it because everyone else is on it. Then you check it, everyone else is checking it. But it’s starting to feel a bit jaded. It’s starting to feel a bit tired, quite frankly.”
In many ways, the social-media industry’s trajectory mirrors larger trends in internet use, analysts say.
With more than half the world’s population already online, global internet use grew by just 7 per cent last year, down from 12 per cent in 2016, according to an annual internet trends report from Mary Meeker, partner in Silicon Valley venture firm Kleiner Perkins Caufield & Byers.
Shipments of new smartphones were also flat for the first time last year, because so much of the world already owns a mobile phone.
“The story with social media is actually pretty similar to what we see with … smartphone adoption or internet use more broadly,” said Aaron Smith, associate research director at the Pew Research Center. “We think of them as new things, but in many ways these are fairly mature technologies at this point.”
Social-media companies can’t look to emerging economies for much more growth. Pew researchers estimate that social-media use has hit 53 per cent in developing countries, not far from the 60-per-cent average across advanced economies.
What growth is left for platforms such as Twitter and Facebook comes primarily from baby boomers and seniors, as teenagers and young adults flock to photo and video services such as YouTube and Instagram – a demographic shift with cultural and business implications Mr. Smith says researchers are only just now trying to unpack.
What’s more, users also appear to be moving away from advertiser-friendly social-media platforms toward private-messaging services, which offer more privacy for users but fewer ad-revenue opportunities for companies.
As companies such as Facebook and Twitter have grappled with a backlash over data-privacy and the role their platforms have played in facilitating foreign powers meddling in the political affairs of other countries, messaging apps have become an increasingly important way for consumers to read and share news, researchers from the Britain-based Reuters Institute for the Study of Journalism found in a survey earlier this year.
Gartner predicted last year that messaging services would eclipse social-media platforms as the most popular smartphone apps within two years.
A new platform capable of shaking up the established order will be one that can attract large numbers of users quickly with new features, while also respecting their privacy, Ms. Ekholm said. “The next big trend is going to be around providers who can do that in a very personalized way, but also in a way that makes people feel as if they’re not leaving too many data trails behind them,” she said. “Whoever that is going to be is going to lead over the next five years.”
While some social-media companies are experimenting with new revenue streams from messaging apps, the services have yet to prove to be big moneymakers.
China’s WeChat, which has more than one billion users despite being the dominant messaging app in only a handful of countries, has added features such as travel booking and payments. But WeChat’s parent company, internet conglomerate Tencent, has yet to publicize how much money it makes from the private-messaging service alone.
Facebook owns two of the world’s largest messaging services – WhatsApp and Messenger. The company is looking to earn money by allowing businesses to reach customers over both messaging apps and is testing out payments on WhatsApp in India. But chief operating officer Sheryl Sandberg warned last month that such efforts are still in their “very early days.”
A bigger concern for the industry is that just as social-media use is approaching a saturation point, so too is digital advertising.
Social-media companies have benefitted tremendously in recent years from the profound shift in ad budgets away from traditional print media toward online ads. But eventually digital advertising budgets will start to slow, as they move in line with the pace of growth of the overall advertising industry, argues Pivotal Research analyst Brian Wieser.
Already, Facebook and Alphabet Inc.'s Google make up 70 per cent to 80 per cent of total digital advertising budgets. “The faster they grow now, just means less growth later,” Mr. Wieser said.