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New Data Suggests Facebook Fatigue Is Setting In

By Evan Niu, CFA – Sep 5, 2018 at 12:53PM

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But is it?

User metrics are among the most important operating metrics for Facebook (META 0.85%) investors. Despite ongoing privacy scandals, those figures haven't really registered any meaningful dip or other negative trends. Globally, the company's user metrics remain remarkably resilient in the face of controversy, and last quarter's sell-off was primarily related to financial guidance as opposed to any concern around the user base, which now stands at over 2.2 billion monthly active users (MAUs).

Still, investors need to keep an eye on any potential signs that usage and engagement could be at risk.

Generic illustration of a News Feed post

Image source: Facebook.

Taking a break

The Pew Research Center released estimates today regarding Facebook usage among U.S. adults, and the results suggest that Facebook fatigue could be setting in among broad swaths of the company's domestic user base. The results are based on data collected from surveys conducted from May 29 to June 11 (n = 4,594), which was a of couple months after the Cambridge Analytica revelation.

Over the past year, a whopping 42% of respondents said they had taken a break from Facebook for "several weeks or more." Another 26% of respondents said they had deleted the app from their phones altogether, while 54% of users surveyed have tweaked their privacy settings. Making privacy settings more prominent and accessible was one of the changes Facebook made in the wake of the Cambridge Analytica scandal, which raised awareness of the privacy cost associated with many free online services.

The data echoes my own personal experience. Anecdotally, I only check in to Facebook once every few weeks, and my wife deleted her account completely after the Cambridge Analytica story broke. Many of my friends also find themselves becoming less engaged with the service over time.

It's hard to reconcile the data with reported metrics

At face value, the results are a bit concerning, particularly the 42% figure. That's nearly half of respondents taking protracted periods of time off from Facebook. There are a couple of ways to look at that result in the context of Facebook's reported user metrics. Any user that took several weeks off would no longer qualify as a daily active user (DAU), but would likely still meet the criteria of a MAU.

Facebook defines an MAU as any user that logs into Facebook or Messenger in the last 30 days prior to the date of measurement. In other words, through a quarter, a user could be inactive for two full months, check in once during the third month of the quarter, and then be counted as an MAU. That could explain why MAUs haven't really budged much over the past year, but it's harder to reconcile the results with DAUs remaining stable, too. DAUs and MAUs in the U.S. and Canada have hovered around 185 million and 240 million, respectively, over the past year.

Concerns around Facebook fatigue pop up every few years, but ultimately Facebook is still reporting resilient user metrics every quarter without fail. While Pew's methodology is sound, it seems that you can't extrapolate the results from the respondents across Facebook's entire user base in the U.S., as North American DAUs have only fluctuated up or down by less than 1% on a sequential basis for the past four quarters.

Evan Niu, CFA owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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