Home Web internet Analysis: Facebook usage drops for the first time. Will Instagram follow?

Analysis: Facebook usage drops for the first time. Will Instagram follow?

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A giant ‘like’ icon made popular by Facebook is seen at the company’s new headquarters in Menlo Park, California January 11, 2012. REUTERS/Robert Galbraith/File Photo

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Feb 3 (Reuters) – TikTok, the pandemic and India’s mobile data costs all helped drive people away from Facebook at an unprecedented rate last quarter. The big question is, when will Instagram’s turn be?

Forecaster Insider Intelligence does not expect Meta Platforms Inc’s (FB.O) social media service Instagram to lose users in the next three years. But its November estimates show Instagram’s monthly user growth will fall to 5.8% this year and 3.1% by 2025, from 16.5% last year.

Instagram, which the tech giant acquired in 2012 for $1 billion, has been seen as an antidote to Facebook’s slowing growth as revenue from ads on Instagram is increasingly crucial to Meta.

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The company invests these funds in the creation of a new company selling virtual reality glasses and related metaverse technologies. A drop in Instagram’s user numbers and failure to raise ad prices could halt Meta CEO Mark Zuckerberg’s ambitions.

Fewer people checked their Facebook daily per quarter than a year earlier for the first time in the last three months of 2021, Meta said on Wednesday. It was one of several troubling signs, along with below-expected earnings and a disappointing earnings outlook, that sent shares down more than 26% on Thursday. Read more

Meta chief financial officer Dave Wehner told financial analysts on Wednesday that part of the decline in usage of Facebook’s main app and website came from fewer COVID-19 lockdowns, which have tended to generate a boom in online activity. He also blamed rising internet costs for consumers in India and growing interest in ByteDance Inc’s video-sharing app TikTok.

Meta doesn’t regularly explode Instagram usage, but analysts say TikTok is also hurting Instagram’s growth.

Facebook and, to some extent, Instagram have already overcome challenges including data privacy disasters, scrutiny of user welfare and competition from Snap Inc (SNAP.N) Snapchat, Twitter Inc ( TWTR.N) and many more over the years.

Indeed, Instagram is investing billions of dollars in video-related features, like a TikTok-style option called Reels. Zuckerberg told analysts on Wednesday that Reels was “by far” his fastest growing content format and biggest contributor to Instagram engagement growth.

Analysts say reels could eventually become a bigger revenue generator than ads associated with photo and text posts. But in a nod to the challenge ahead, Zuckerberg noted, Reels isn’t yet popular enough to attract the ad sales that older features do.

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Reporting by Paresh Dave and Elizabeth Culliford; Editing by Kenneth Li and Aurora Ellis

Our standards: The Thomson Reuters Trust Principles.