Facebook loses its daily users for the first time ever

From the time of its inception, Facebook's user growth has essentially been up and to the right. But surprisingly on Wednesday, it reported its first quarterly decline in daily users globally, coupled with lower-than-expected ad growth that sent its shares down about twenty percent.

The massive stock drop, which instantly wiped out around $200 billion in market value, shows that Facebook's corporate rebranding to Meta isn't enough to distract investors from problems in its core social media business. User growth on Facebook, Instagram, and WhatsApp was not only essentially flat in the last quarter, but Facebook's main app lost 1 million daily users in North America, where it makes the most money through advertising. That drop led to an overall decline in daily Facebook users worldwide, which a company spokesperson confirmed is the first sequential decline in the company history.

That drop to 1.929 million daily users from 1.93 billion the previous quarter is likely to reflect Facebook's growing lack of relevance with young people. Meta doesn't break out Instagram's user numbers, but daily users across all apps rose just shy of 2.82, adding just 10 million users since the third quarter.

Meta continues to be wildly profitable, pulling in nearly $40 billion in profits last year alone, mainly from advertising. But it's also losing billions at Reality Labs, the division responsible for Quest VR headsets, VR software, upcoming AR glasses, and other metaverse-related initiatives. That division lost $10.2 billion last year and reported revenue of $2.3 billion, a stat that includes Quest sales and its share of VR app purchases. Meta has yet to reveal the Quest's sales number, though third-party estimates put the number at around 10 million units. In an earnings call with investors on Wednesday, Zuckerberg said Meta's next VR headset will launch later this year and be at the "high end of the price spectrum."

It has made it clear that he intends to increase spending on Reality Labs in the coming years and that he sees a combination of AR and VR as the next big computing platform. Meta's biggest problem right now is the social media business that pays for those investments.