“The most powerful part of the social media business model is the network effect: the more people that have joined a network, the more people want to join,” as Bloomberg explains. “It’s a winner-takes-all phenomenon, and the reason that Facebook, for 18 years, has been able to keep adding people to its platform and targeting them with advertisements. When something keeps happening for almost two decades, it feels inevitable. But it’s not.
“On Wednesday, Facebook’s user base stopped growing. It even shrank in some markets. The news, combined with a forecast for less revenue growth than expected in the current quarter, shook the company and sent stock down as much as 24% in after-hours trading.
“It’s a moment that Meta Platforms Inc. Chief Executive Officer Mark Zuckerberg has warned his employees about. Internet platforms and trends, he has explained, can fade as quickly as they can grow. He fears that the network effect can just as easily work in the opposite direction, according to people familiar with the matter, who asked not to be named discussing Zuckerberg’s private conversations.
“Facebook’s hands are tied,” Nikita Bier, a former employee, said on Twitter. “RIP.”
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