A key question confronting Facebook in 2019 is whether Facebook’s nightmare year of scandals will have real consequences for its users’ behavior.
There are already indications that people are using the 2.2 billion-member social network less than they used to — and there are fears among some observers and investors that usage could continue to dwindle over the coming months.
But even if that’s the case, that’s not necessarily any reason to worry, according to Rob Saunderson, an analyst at MKM Partners.
In a new research note for clients on Monday, Saunderson argued that Facebook can continue to grow its revenues even if it can’t convince users to spend more time on the social network, and points to television as a historical example of this.
“While we think ad ‘engagements’ on television maxed out earlier, pay-TV subs in the US peaked in 2010,” he wrote. “We think it’s conservative to say that television advertising revenue has continued to grow for at least six years past the peak in engagement.”
Adding to this, Facebook the company isn’t just Facebook the app. It has a plethora of other social apps — namely Instagram, Messenger, and WhatsApp — that are largely free of the reputational issues plaguing Facebook’s core product. Even as Facebook dwindles, these other services are likely picking up the slack, Saunderson reckons.
“Cumulative engagement across the family of apps remains very healthy and much of the reported engagement decline on Facebook is likely fuelling engagement growth on other [Facebook] properties,” the analyst wrote.
In other words: The television industry’s continued good health even after viewership started to go into reverse shows that a drop in engagement isn’t necessarily the end of the world for Facebook — and the company also has a bevvy of other lucrative properties to support it. Some of these, like WhatsApp, are extremely early in their path to monetization, and are likely to see significant revenue growths for years to come.
Facebook doesn’t break out data on how much time people are spending on the social network on a regular basis. Third-party estimates abound, many of which paint a negative picture for Facebook —one from Pivotal published in late 2018 estimate a 7% decline year-on-year. But they’re ultimately estimates and educated guesswork, and Saunderson is largely skeptical of all these figures: “There is no reliable data on total engagement or time spent metrics in our view,” he wrote.
“[Facebook’s] management did say that the 5% reduction in time spent in Q4’17 was 50mn hours per day of engagement, suggesting more than 90bn hours of total engagement for the quarter.”
MKM Partners remains highly bullish on Facebook’s prospects, and has set a 12-month price target of $190 — far above the level it’s currently trading, around $146. Of course, even this bullish target remains below Facebook’s 52-week high of $218.62.
Do you work at Facebook? Got a tip?Contact this reporter via Signal or WhatsApp at +1 (650) 636-6268 using a non-work phone, email at [email protected], Telegram or WeChat at robaeprice, or Twitter DM at@robaeprice. (PR pitches by email only, please.) You can alsocontact Business Insider securely via SecureDrop.