In the wake of Facebook Inc.'s (FB) headline Cambridge Analytica data scandal and Chief Executive Officer Mark Zuckerberg's appearance in front of Congress, new data suggests that the social media giant is losing ground to Alphabet Inc.'s (GOOGL) YouTube platform, among other properties of the global search giant. (See also: Elon Musk Calls for Social Media, AI Regulation.)
Pivotal Research analyst Brian Wieser, who reviewed Nielsen digital consumption data, indicated that Google's on-demand video platform YouTube and navigation application Waze accounted for a combined 27.4% of all time spent on digital media, reflecting a 3% jump over the previous year. Meanwhile, Menlo Park, California-based social networking pioneer Facebook saw time spent on its platform fall by about 2% to 16.3% over the same period.
In the fourth quarter, Facebook attributed a dip in average time spent on its platform to factors including fewer viral videos and a major change to the news feed, which refocused it on posts from friends and family and away from businesses and media outlets. The Silicon Valley giant posted its slowest ever quarter-over-quarter (QOQ) daily user growth and first decline in daily active users in the U.S. and Canada in Q4, losing 700,000 people in the two countries combined.
Facebook Relies on User Engagement to Sell Ads
Given that Facebook makes its money on advertisements, relying on user engagement and data collection for targeted ads, the report could represent significant risk to the tech titan, already facing pressures from its billions of users and regulators worldwide worried about its data and privacy practices.
While Facebook benefited from a 4% gain in the number of users on its platform, its main site lost 5% in time spent, according to Weiser, pegging the decline to a 8% dip in time spent per person. Instagram, viewed by many on the Street as a new bright spot for the 14-year-old social media company, saw a 7% increase in time spent per user.
Moving forward, investors will be closely monitoring Facebook's user engagement, with some bears pointing to potential downside of a #DeleteFacebook trend. After losing roughly $100 billion in market capitalization in the weeks following news that political data analysis firm Cambridge Analytica had acquired data on 87 million unsuspecting users for targeted ads, FB shares have regained ground in the recent days on what is has been viewed as an excellent performance by Zuckerberg on the Hill. (See also: Facebook Up on Zuckerberg's Appearance in Congress.)