Does Meta’s nightmarish stock performance in the past 24 hours mark the beginning of the end for facebook’s unrivaled dominance over social media, or it is merely a bump in the road towards a new future for the company?
For a long time, I have considered Facebook close to unstoppable in terms of dominating the social media landscape, even though Facebook’s coolness among young audiences has vanished several quarters ago. Looking at stock performance, this has been a shared perception among investors and analysts. Until now.
As a reaction to weaker than expected forecasts, the Meta stock has plummeted for two consecutive days. The company, which released earnings under its new name for the first time, missed earnings estimates for the fourth quarter, but outperformed expectations on revenue for the quarter, at $33.67 billion vs. $33.4 billion estimated. The company also stated that Apple’s privacy changes and limitations on third-party tracking had resulted in a $10 billion revenue hit this fiscal year.
TikTok’s success also acts as a sign that even Facebook, along with their adjacent platforms, Instagram and Whatsapp are not invincible when facing demand-side disruption. IN the never-ending compatition for users attention, Facebook reported its first-ever decline in daily active users in 18 years.
The company’s Reality Labs division, which makes virtual reality goggles, smart glasses, and other yet-to-be-released products spent more than $10bn in 2021. The spending dragged down quarterly profits by 8% and Zuckerberg has indicated that there is much more spending to come.
While this is is what makes the headlines surrounding Meta’s stock performance the past couple of days, this is merely the tip of the iceberg of problems surrounding the company. Last week it was known that meta had initiated a sell-off of their larger than life cryptocurrency project, Libra/Diem, which was confirmed finalized earlier this week. This follows a series of negative issues surrounding Meta’s company policies consequently favoring revenue growth over privacy, cyber security as well as preventing misinformation and hate speech.
JPMorgan analysts downgraded the stock from overweight to neutral on Thursday and lowered their price target from $385 to $284. The analysts said Meta “is seeing a significant slowdown in advertising growth while embarking on an expensive, uncertain, multiyear transition to the Metaverse.”
According to Wired, the metaverse is an amorphous concept that no one really wants big tech to build.
The Metaverse is a fuzzy concept: It entered dictionaries via Neal Stephenson’s 1992 dystopian sci-fi novel Snow Crash, where the Metaverse is the virtual refuge from an anarchy-laden world controlled by the Mafia, and was brought back by a series of blogposts by VC Matthew Ball. In Ball’s formulation, which has quickly risen to scriptural status, the Metaverse is an always-online virtual world that seamlessly blends with the real, flesh-and-blood world, courtesy of augmented reality, virtual reality, and mixed reality. Videogames are part of it, but are not it; crypto and tokens will play sizable roles as the Metaverse’s currencies and assets, given that people will actually work and make money in it.
In my opinion, herein lies the key question for the way forward. Are investors pulling out as Meta is losing ground in their core business in favor of a highly uncertain future no one really has a clear perception of and has every sign of a solution looking for a problem? And even if the metaverse were to happen, does anyone want it to be governed by Facebook’s parent company, Meta?