Please ensure Javascript is enabled for purposes of website accessibility

Where Facebook Users Are Spending All Their Extra Time

By Adam Levy - Feb 21, 2018 at 8:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Time spent on Facebook fell 5% last quarter as a result of news feed changes.

Facebook (META 7.19%) has been making some big changes to its news feed lately, and users have spent less time on the platform as a result. CEO Mark Zuckerberg says aggregate time spent on Facebook fell 5% in the fourth quarter -- about 50 million hours. The number of daily users in the U.S. and Canada fell about 700,000.

The biggest winner from the decline in usage of Facebook has been Alphabet's (GOOG 5.20%) (GOOGL 5.11%) Google. Google properties, led by YouTube, have seen a significant increase in time spent among U.S. adults over the past year, according to Pivotal Research group and data from Nielsen. Google's share of time spent on digital content platforms increased 5 percentage points year over year while Facebook's -- including Instagram, Messenger, and WhatsApp -- fell 1.5 percentage points.

A hand holding a smartphone with Facebook's news feed loaded.

Image source: Facebook.

No wonder Facebook is trying to copy YouTube

When Facebook saw other apps stealing its users' attention in the past, it made an attempt to acquire them. YouTube is obviously way too big for Facebook to acquire, with its $15 billion or so of annual revenue. Even if Facebook could afford it, it's not as if Google is looking to sell what's seemingly its biggest growth engine.

So Facebook is working as hard as it can to copy Google. It launched Watch last summer, but it's off to a slow start. The company may invest as much as $1 billion in content this year to help seed the platform, but it eventually wants to get to the point where it can simply share ad revenue with content creators the same way YouTube does.

Even with a $1 billion content budget, Facebook will have a hard time taking on YouTube. YouTube is much larger than any competitor Facebook's challenged before, with 1.5 billion logged in users spending over an hour per day on average streaming video on mobile. And YouTube's ability to monetize content is just as good as, if not better than, Facebook's, providing no reason for creators to switch platforms.

Facebook hopes to differentiate itself by making its content more social by showing comments from friends, making more interactive content, and offering features such as Watch Time, which allows users to stream shows at the same time and experience them together. But it still has to find content that resonates with viewers to draw users into the ecosystem in the first place.

Never count out Facebook, though. Its ability to copy competitors successfully in the past has often taken patience, but it ramped up quickly once it hit.

Does Facebook need to win that time back?

Facebook's management doesn't seem too concerned about the decline in engagement. Spending less time on Facebook won't necessarily have a negative impact on the company's ad revenue.

Advertisement impressions per user may even increase as Facebook focuses the news feed on native content instead of passively consumed articles and videos. Moreover, the ad impressions users see may become more effective as users become more deeply engaged with the content in their feeds.

But as ad budgets shift from television to digital video, Facebook may be missing out on a big revenue opportunity. The changes to the news feed put less emphasis on video with the hopes that users interested in video will use the Watch tab. For now, however, it appears users interested in video are instead going to YouTube, which stands to benefit greatly as more ad dollars flow from television to digital.

While the news feed changes might not exactly hurt Facebook, it's curbing a major opportunity. Google will happily take video ad budgets until Facebook can figure out Watch or another video ad solution.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$170.16 (7.19%) $11.41
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,359.50 (5.11%) $114.66
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,370.76 (5.20%) $117.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.