Meta Platforms Inc. (NASDAQ:META), the parent company of Facebook, has spent the last few years overhauling its flagship social networking app. The aim is to feature a broader array of posts and videos to fend off competition from TikTok and win back younger users.
Background
In late 2021, TikTok’s popularity surged, while Facebook interactions dwindled following a pandemic boom. Younger users were leaving Facebook en masse. CEO Mark Zuckerberg assembled a team of veterans including Chris Cox (head of product), Adam Mosseri (Instagram boss), Will Cathcart (WhatsApp lead), and Tom Alison (head of Facebook) to address the issue. After multiple meetings and discussions, the group decided that to attract younger users, Facebook needed to feature more content from outside a user’s network of friends and family.
The Strategy Shift
Two years later, this strategy has shown signs of success. Facebook’s user base in the US and Canada, crucial markets for the company’s core advertising business, is growing again after years of stagnation. Young adults are using Facebook more frequently, and advertising revenue is on the rise.
This move was driven by TikTok’s success. The short-form video app, owned by China’s ByteDance Ltd., gained popularity by offering a stream of personalized content based on user interests. In contrast, Facebook had primarily relied on users’ online connections to determine what posts people saw. Recognizing TikTok’s impact, Meta decided to implement similar “recommendation” algorithms.
Implementing Recommendations
“This did feel very much like one of those threshold decisions,” said Tom Alison. “It was scary because there was always this underlying fear of losing our social heritage.” Despite the concerns, Meta made recommendations a core part of its strategy. Initially, this new algorithm was deployed in Reels, a TikTok clone launched on Instagram in 2020. Today, 50% of the content seen on Instagram is algorithmically recommended.
By the end of 2021, Meta began pushing outside content within Facebook’s Feed. This was a significant decision, as Facebook’s main social network remains its most lucrative product. There were concerns that this change could reduce Facebook usage or harm Meta’s business, but those fears have not materialized. Now, 30% of the posts people see in their Facebook Feed are from outside their network, more than double the amount from two years ago. Advertising revenue increased by 15% in 2023 compared to 2021.
User Growth and Engagement
Facebook is experiencing a resurgence in user growth, especially among younger demographics. Its audience in the US and Canada grew by 10 million people over 2022 and 2023, after adding no new users in 2021. Usage among 18-to-29-year-olds has also increased. Pew Research found that 67% of US adults in this age group used Facebook in 2023. The company’s flagship network has seen five consecutive quarters of growth in daily active users in this age range. Over 40 million young adults use Facebook daily, the highest total in three years.
This resurgence counters the narrative that Facebook is primarily for older users. While it is unclear if the Feed changes are the sole driver of this growth, Meta executives are encouraged. The new strategy balances the traditional friends and family content with external recommendations.
Advancements in AI
Meta’s push towards recommendations has been facilitated by advancements in artificial intelligence. Previously, Meta’s algorithms ranked content from a limited pool of posts. Now, they must rank content from billions of potential posts, creating a more complex challenge. In 2022, Meta engineers shifted the new algorithms to more powerful GPU processors to analyze larger volumes of data more quickly.
Future Plans
Meta is working on a universal algorithm that could operate across all its features, such as Feed, Reels, and Facebook Marketplace. This would allow a seamless user experience, where recommendations could cross over from one product to another. For example, a user searching for an Instant Pot on Marketplace might see cooking-related content in Groups or Reels.
“This is a big focus for us this year,” Alison said. “If we are right, you’re going to have the Instant Pot experience much more frequently across many more products.”
Conclusion
Meta’s strategic shift towards AI-driven recommendations, inspired by TikTok’s success, is revitalizing Facebook. This approach aims to balance the platform’s social heritage with the need to engage users through personalized content. As Meta continues to refine its algorithms and expand its recommendation system, it aims to solidify Facebook’s appeal to younger users and drive further growth.
Featured Image: Unsplash