TikTok’s Meta Effect

Wow. TikTok just managed a feat that advertiser boycotts and years of complaints about toxic content on Facebook couldn’t pull off—it loosened Meta Platforms’ grip on advertisers. Meta issued a first-quarter revenue growth outlook today that was so slow (3% to 11%) it could have come from an old-media company. One of the key reasons: Meta is facing “increased competition for people’s time,” particularly from hugely popular Chinese-owned short-video app TikTok. The news crystallized investor anxieties about the long-term prospects for Meta’s social media apps, sending Meta shares down 23% in after-hours trading.

User growth has already stalled. Facebook’s daily active users dipped marginally in the fourth quarter, to 1.929 billion from 1.93 billion in the third quarter, the first time that has happened. Facebook’s user numbers have been flattening for a while, of course, but until now ad growth has stayed strong. Now a confluence of factors is hitting Meta. Aside from TikTok's popularity—the app has been doubling down on ad-sale efforts—Apple’s ad-tracking changes have severely undercut Meta’s targeted-ad sales model. Supply-chain constraints, causing merchants to advertise less, are not helping. These all contributed to a sharp slowdown in fourth-quarter growth, as Meta had forecast.