![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2021\/10\/Facebook-1.jpg\")
<\/a><\/p>\nMost people born before 2000 had created a Facebook account by age 19 or 20, the research showed. Now\u00a0Facebook wasn\u2019t expecting people\u00a0born later to\u00a0join\u00a0the social network until they were much older, perhaps\u00a024 or 25, if ever.<\/p>\n
The report is among hundreds of internal documents collected by former Facebook employee-turned-whistle-blower Frances Haugen, who went public in early October with accusations that Facebook has been prioritizing profits over user safety and security.<\/p>\n
The documents\u00a0were disclosed\u00a0to the U.S.\u00a0Securities and Exchange Commission and provided to Congress in redacted form by\u00a0Haugen\u2019s legal counsel. The redacted versions were obtained by a consortium of news organizations, including Bloomberg News.<\/p>\n
Some of the documents were previously used in stories on growth, teenagers and other topics by\u00a0The Wall Street Journal<\/a><\/strong>.<\/p>\n Facebook shares fell less than 1% as the market opened in New York on Monday.<\/p>\n Taken together, the documents paint a stark picture of the years-long decline in growth metrics for key user groups, like teens and young adults in the U.S., on the flagship Facebook app. The internal reports, some of which haven\u2019t previously been reported,\u00a0show:<\/p>\n \u201cWhat should we (particularly) optimize for among young adults?\u201d one of the reports asked, referring to users between the ages of 18 and 29. \u201cWe don\u2019t know enough to know.\u201d<\/p>\n While Facebook has spent years studying its declining popularity among young people\u2014an erosion that threatens the company\u2019s advertising business, which has conquered an\u00a0estimated<\/a><\/strong> 23.7% of the global digital ad market – Facebook executives have been markedly less forthcoming about those concerns in public.<\/p>\n The company\u2019s tremendous business success has masked the persistent issues with young people. Facebook\u2019s total audience has expanded consistently for years, and revenue has risen to nearly $30 billion per quarter. The company\u2019s market value is close to $1 trillion.<\/p>\n Those successes\u00a0mean\u00a0the declines among teens and young adults on Facebook have been almost invisible to outsiders.\u00a0Facebook doesn\u2019t break down its user numbers by age group, and it has evaded questions from Wall Street analysts about the main app\u2019s popularity with young people.<\/p>\n That discrepancy is the foundation of a formal whistleblower complaint filed by Haugen with the SEC.<\/p>\n Among Haugen\u2019s arguments is that Facebook \u201chas misrepresented core metrics to investors and advertisers\u201d for years by showing overall growth but excluding details that show slowdowns in key demographics, according to the letter outlining her complaint.<\/p>\n Attracting teens, who make up an entire generation of consumers, has long been a challenge for Facebook. But user growth among a slightly older cohort\u2014which Facebook refers to as ‘young adults’ – has been on the descent for almost a decade, too, the documents show.<\/p>\n 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. Those young adults are also sharing less than they were a year ago, and sending fewer messages.<\/p>\n \u201cThere is a [young adult] sharing problem,\u201d reads one internal report from early 2021. \u201cThey are choosing other apps to share day-to-day moments and life moments.\u201d<\/p>\n Haugen also cited documents that show many Facebook and Instagram profiles are secondary accounts owned by a single person, an issue that she claims led Facebook to misrepresent its total audience size to advertisers.<\/p>\n A 2017 internal study found that more than\u00a015% of all new Facebook accounts created by teenagers were second accounts\u2014what the company calls SUMAs, or \u201cSingle User Multiple Account.\u201d<\/p>\n In the US, 11% of all teen Facebook accounts were SUMAs as of January 2018, according to one report. That amounted to more than 1 million accounts.<\/p>\n All of these variables, from declining user engagement to duplicate accounts, suggest that Facebook hasn\u2019t been transparent with investors and advertising clients about its core business, Haugen alleges. She says the documents she gave to the SEC and Congress prove it.<\/p>\n Our products are still widely used by teens, but we face tough competition from the likes of Snapchat and TikTok,\u201d said\u00a0Joe Osborne, a Facebook spokesperson.<\/p>\n \u201cAll social media companies want teens to use their services. We are no different. That\u2019s why we\u2019re continuing to build new products and features that are entertaining and help teens, their friends and family stay connected to each other.\u201d<\/p>\n Osborne added that the company\u2019s SEC filings include details about its challenges, including user engagement and estimates of\u00a0duplicate and false accounts.<\/p>\n Facebook is \u201cconfident that our disclosures give investors the information they need to make informed decisions,\u201d he said.<\/p>\n Targeted Advertising<\/strong><\/p>\n Facebook\u2019s user growth and engagement are the company\u2019s most important selling points for investors and advertisers.<\/p>\n The more users Facebook has, the more people it can target with advertisements. The more users interact with Facebook, the more ads\u00a0those users are likely to see.<\/p>\n This makes Facebook\u2019s monthly user base of almost 3\u00a0billion people\u2014and the promise of its consistent future growth\u2014a major driver of a 74% stock increase\u00a0in the past two years.<\/p>\n Not all users are created equal, though. Facebook makes almost 13 times more\u00a0money per user<\/a><\/strong> in the US and Canada than it does the Asia-Pacific region, for example.<\/p>\n Teenagers are also important. They don\u2019t typically have established brand preferences in the way adults do, and young people often set cultural norms.<\/p>\n That\u2019s why Haugen believes that Facebook has violated U.S. securities laws by failing to disclose to investors that key user cohorts – including teens and young adults – have been declining in total size and usage.<\/p>\n An internal chart included in Haugen\u2019s filing with the SEC shows that Facebook\u2019s teenage and young adult user bases in the US have shrunk since 2012, and more recent internal data show declines in time spent and expected user growth for both age groups.<\/p>\n That information could impact Facebook\u2019s advertising appeal, Haugen said in her letter to regulators.\u00a0 \u201cFacebook\u2019s stock valuation is based almost entirely on predictions of future advertising growth,\u201d the letter to the SEC reads.<\/p>\n SEC Scrutiny<\/strong><\/p>\n Federal securities laws require that companies be truthful when making statements to shareholders, and Facebook has already been accused of violating those demands in recent years. In 2019, the social media giant paid\u00a0$100 million<\/a><\/strong>\u00a0to settle SEC allegations that it made misleading statements about the misuse of user account data by Cambridge Analytica, a consulting firm hired by former President Donald Trump\u2019s campaign.<\/p>\n The regulator claimed that Facebook\u2019s public disclosures described the potential misuse of customer data as a hypothetical when the company already knew such information had been improperly accessed.<\/p>\n The crucial test the SEC relies on in determining whether something should be disclosed is whether it\u2019s material, meaning there is a substantial likelihood that a reasonable person would consider it important.<\/p>\n In reality, how materiality is applied is often murky, with no black or white guidelines.<\/p>\n For instance, companies have sometimes interpreted material matters as those that would have a specific impact on earnings, such as something that could lower profits by at least 5%.<\/p>\n But the SEC has said such assessments alone aren\u2019t adequate for determining whether items are relevant to investors.<\/p>\n The recent whistle-blower allegations will likely put Facebook in the SEC\u2019s cross-hairs again, said James Cox, a professor at Duke University School of Law who focuses on securities regulation.<\/p>\n The SEC will probably scrutinize the company\u2019s public statements on user engagement and how they compare to internal communications, he said.<\/p>\n \u201cIf I were at the SEC, I\u2019d map out the statements Facebook made over time and then line them up with the documents from the whistle-blower,\u201d\u00a0Cox said. \u201cYou\u2019re going to find a lot of round pegs that don\u2019t fit into square holes.\u201d<\/p>\n Facebook acknowledged a teen retention issue on\u00a0an earnings call in 2013, according to a review of transcripts by Bloomberg. In October of that year, then-Chief Financial Officer\u00a0David Ebersman said the company had noticed a decline in usage among \u201cyounger teens.\u201d<\/p>\n \u201cUsage of Facebook among US teens overall was stable from Q2 to Q3,\u201d he said. \u201cBut we did see a decrease in daily users, specifically among younger teens.\u201d<\/p>\n That\u00a0admission helped\u00a0erase\u00a0<\/a>post-market stock gains after an otherwise solid quarter, and came less than a year after Facebook tried to buy rival Snapchat\u00a0for a reported $3 billion.<\/p>\n Facebook\u00a0instead focuses on data points each quarter that tend to show the company\u2019s overall\u00a0user base is growing. Facebook reports the total number of \u201cmonthly active people\u201d and \u201cdaily active people\u201d across all its apps, but it doesn\u2019t\u00a0report how many users it has by country, or how old those users are.<\/p>\n In other instances\u00a0when analysts have asked about teens on quarterly earnings calls, Facebook has declined to share specifics. In July 2016, shortly after Facebook\u00a0created an internal team focused specifically on teen-related products, CFO Dave Wehner was asked to share details on trends Facebook was seeing with younger users.<\/p>\n \u201cOn the teen front, younger users, we continue to be the best way to reach the largest global audience of teens and millennials,\u201d he replied. \u201cTeens remain very engaged on Facebook.<\/p>\n Clearly, how they’ve used our service has evolved over the years. And in addition to Facebook, they’re using Instagram, Messenger and WhatsApp. So, from a teen perspective, that\u2019s some color there.\u201d<\/p>\n In her letter to the SEC, Haugen also says Facebook is mischaracterizing its growth by failing to disclose\u00a0that many accounts belonging to teenagers are actually duplicate accounts.<\/p>\n These accounts have been disclosed generally by\u00a0Facebook, and represent a key data point for investors and advertisers because they can lead to inflated estimates about\u00a0the number of people who are actually using\u00a0the service.<\/p>\n The company\u2019s quarterly earnings filings show that\u00a0duplicate accounts represent about 11% of its global monthly active user base, but one internal Facebook analysis found that the company\u2019s model undercounts the number of so-called SUMAs.<\/p>\n That\u00a0metric is particularly important\u00a0when it comes to counting\u00a0teenagers. According to a 2017 document, more than 15% of new teen accounts are being created by existing users.<\/p>\n More than half of teens who create additional profiles aren\u2019t active on multiple accounts. That\u2019s unlike so-called Finsta accounts on Instagram, often set up by younger people to communicate privately with a smaller circle of friends.<\/p>\n Facebook\u2019s SUMAs are more like account resets rather than separate accounts, according to the 2017 document.<\/p>\n Duplicate accounts on Facebook are leading to \u201cextensive fraud\u201d against advertisers, Haugen alleges. Advertisers pay Facebook to target their campaigns at specific audiences at a certain frequency.<\/p>\n Duplicate accounts raise the risk that advertising aimed at different accounts are actually directed at the same person, and that advertisers are overcharged, Haugen says.<\/p>\n A 2018 analysis on duplicate accounts from the internal documents estimated that a majority of so-called reach and frequency advertising campaigns using broad audience targeting would see an audience reduction of 5% to 8% when SUMAs are accounted for.<\/p>\n The report characterizes this effect as \u201climited.\u201d A company spokesperson said\u00a0that Facebook discloses that some ads reach duplicate accounts in the company\u2019s \u201cHelp Center.\u201d<\/p>\n The issue of duplicate accounts and the true size of Facebook\u2019s user base is already the subject of a lawsuit against the company.<\/p>\n In a complaint filed this year in federal court in San Francisco, advertisers claim that Facebook inflated the number of people they could reach on the platform, partly because of duplicate accounts, leading to overcharges.<\/p>\n Teens Team<\/strong><\/p>\n As teenage usage in the U.S. was declining in early 2016, Facebook spun up a \u201cTeens Team\u201d internally to build products focused on young people.<\/p>\n The group was small to start, about a half-dozen people, but it eventually grew to around 100 by late 2017. It built a number of features\u00a0targeted at teens, including a video app for people under 21 called Lifestage and led video efforts to entice young creators in international regions, like the\u00a0Middle East and Latin America.<\/p>\n The team, eventually called the \u201cYouth Team,\u201d also ran Messenger Kids, a chat app designed for elementary-school children.<\/p>\n Members of the team even contributed to a report for Chief Executive\u00a0Officer Mark Zuckerberg in July 2016 suggesting that Facebook could buy Musical.ly, the viral-video sharing app that became TikTok, according to two\u00a0former employees.<\/p>\n The documents illustrate how Facebook may have been grasping for ways to turn around the app\u2019s fortunes with young people, conducting extensive research into their habits and perceptions of the company and brainstorming ways to boost engagement.<\/p>\n One research report reviewed by Bloomberg shows Facebook tested different messaging features, like emojis and face filters, with children as young as 6.<\/p>\n\n