(Bloomberg) -- Facebook Inc. Chief Executive Officer Mark Zuckerberg, besieged by dozens of stories about his company’s inadequate response to hate speech, misinformation and violent content, sought to paint a rosier picture of the social network’s future, outlining new efforts to attract young users and build immersive digital experiences.
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On Monday, after a consortium of media organizations published a series of damning reports based on internal documents disclosed by a whistle-blower, Zuckerberg implored investors to look past the current narrative. The disclosures included research that showed rising alarm within the company about slowing user growth and engagement among young people. While historically Facebook focused on expanding its services to appeal to the largest number of users, the CEO said, it will instead prioritize those age 18 to 29.
Executives will “make serving young adults their North Star, rather than optimizing for the larger number of older people,” he said during a conference call to discuss quarterly earnings. This “will likely mean that the rest of our community will grow more slowly than it otherwise would have, but it should also mean that our services become stronger for young adults.”
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The company’s shares rose about 2% in late trading, and are up about 20% for the year. Facebook also unveiled a $50 billion addition to its stock-repurchase program, after buying back $14.4 billion of its own shares in the third quarter.
Zuckerberg’s comments come on the heels of revelations unearthed in hundreds of internal documents by former Facebook product manager Frances Haugen, who went public in early October with accusations that Facebook has been prioritizing profits over user safety and security. The documents showed that Facebook has been experiencing a years-long decline in growth metrics for key user groups, such as teens and young adults, on the flagship Facebook app.
The company also emphasized its commitment to building out the metaverse -- an immersive digital environment accessed using virtual and augmented reality tools. To chase future growth, Facebook has been investing in VR and AR-powered products in part because of Zuckerberg’s longtime belief that they will be the basis for the next major platform for human communication, and one where Facebook hopes to leap ahead of rivals.
“I believe this work is critical to our mission because delivering a sense of presence, like, you’re right there with another person,” he said on the call. “That’s the Holy Grail of online social experience.”
Highlighting its dedication to the metaverse, the company said it will start breaking out financial results for Facebook Reality Labs, which includes the Oculus hardware division, next quarter. The move will enable Facebook to separate its main digital advertising business from its major investments in creating virtual worlds and let investors see the costs and revenue associated with those efforts. The company will see a $10 billion reduction in operating profit this year for investments in Facebook Reality Labs, according to the statement.
Facebook is also hosting a conference later this week exploring “the future of augmented and virtual reality.” Those devices would also make it easier for Facebook to deliver its services directly to consumers rather than having to rely on mobile phone makers.
Some versions of these devices have made their debuts. Facebook, in partnership with Ray-Ban, last month unveiled its long-awaited smart glasses, which enable wearers to take photos and video, listen to music and answer phone calls. Oculus in August announced new workplace features for Facebook Horizon, a virtual reality-powered service where people can interact with others as digital avatars.
For the the third quarter, strong user growth for the family of apps including Facebook, Instagram and WhatsApp outweighed some more lackluster aspects of the company’s earnings report. Last quarter’s sales and the forecast for revenue this period missed analysts’ estimates, and the social network said it’s being buffeted by headwinds from Apple Inc.’s restrictions on apps’ consumer data collection and uncertainty related to the post-pandemic economic recovery.
If it weren’t for Apple’s iOS 14 changes, the company would have seen positive quarter-over-quarter revenue growth in the September period, Chief Operating Officer Sheryl Sandberg said.
“When you look at it from a technology perspective, they think that Apple and Google can make changes to their operating system, and that affects” Facebook’s business, said Mandeep Singh, a Bloomberg Intelligence analyst. By building out the metaverse, “they can control their own destiny.”
Zuckerberg also sees luring younger users in a crowded social media market, which includes Snap Inc.’s Snapchat and ByteDance Ltd.’s TikTok, as central to Facebook’s future. The number of young adults on Facebook in the U.S. has declined 2% since 2019, and is expected to continue falling by an additional 4% over the next two years, internal documents show. Those young adults are also sharing less than they were a year ago, and sending fewer messages, according to the documents, which were collected by former employee Frances Haugen.
“They are clearly losing engagement with the younger demographic,” Singh said, though he added, “it’s not hurting them in terms of their ad revenue because they have a more mature business.”
Zuckerberg also offered a full-throated defense of his company’s efforts to combat the ills on its platform as revealed by a wave of news reports based on the documents Haugen collected. The documents, dubbed the Facebook Papers, were disclosed to the U.S. Securities and Exchange Commission and provided to Congress in redacted form by Haugen’s legal counsel. They are also the basis for a series of stories published in the Wall Street Journal starting last month.
The company is battling accusations that it has misled investors and the public about its efforts to fight hate speech and disinformation, and address how the platform was used to organize the Jan. 6 attack on the U.S. Capitol.
On Monday, Zuckerberg said press coverage of the Facebook Papers was part of a “coordinated effort” to paint a negative and unbalanced picture of Facebook’s work to moderate its platform, which he hailed as better than that of rivals.
“Any honest account should be clear that these issues are not primarily about social media,” he said. “That means that no matter what Facebook does, we’re never going to solve them on our own.”
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