Social media may be the most influential innovation of the 21st century. In 2022, if an event doesn’t make it to a social feed, it never really happened, like the tree that falls in a forest with no around to hear it.
But 20 years after Friendster kick-started the industry, something else has become clear about social media: It isn’t a particularly good business. Based on traditional accounting metrics,
parent Snap (ticker: SNAP) has never made a full-year profit.
(TWTR) has just two profitable years to show for its near decade as a public company.
(PINS) finally made money in 2021, but Wall Street forecasts a return to losses this year.
For much of its existence, the industry’s struggles were masked by
dominance. Facebook.com became a human operating system. It was a brilliant idea that was perfectly executed. It couldn’t help but make money. But in retrospect, Facebook wasn’t all that different from a fad diet. It made everyone feel good; then it made us feel guilty. And finally, it mostly stopped working.
This past week, Facebook’s smaller rival Snap said it was cutting 20% of its workforce, or roughly 1,200 jobs, while canceling noncore projects such as its flying selfie camera known as the Pixy.
“We must now face the consequences of our lower revenue growth and adapt to the market environment,” wrote Snap co-founder and CEO Evan Spiegel in a letter to employees.
Meanwhile, Twitter’s future is tied up in a Delaware courtroom, where it will try to force Elon Musk to complete his purchase of the company, even as he regularly disparages the business itself.
Most of Wall Street has been caught flat-footed by social media’s struggles. But not everyone. Back in 2017, Brian Wieser at Pivotal Research downgraded Facebook’s stock, making him just one of two analysts with a Sell rating on the shares.