Will the metaverse save Meta?
Meta’s stock drastically declined more than 20% in profitability in the fourth quarter, their largest one-day drop resulting in a loss of over $200B in market value. This slump left their investors reeling and the rest of us wondering what gives. Some say it’s lack of innovations, some say it’s slow sales and the Apple effect, while others point to the end of times, and to make matters worse, Meta’s flagship endeavor, the Metaverse, will take 5 to 10 years to construct according to Mark Zuckerberg. The timeframe for that ROI isn’t looking promising.
“Innovate or die” – Peter Drucker
This New York Times article suggested Meta’s decline was due to a lack of innovation. The article states, “[t]he problem is innovation: Facebook can’t seem to do it. The company just doesn’t appear to know how to invent successful new stuff.” Instead, they buy out the competition and infect it with their ideas. The issue isn’t just the monopoly Meta produces with these actions, but also the unease investors have. Is Meta capable of creating the metaverse or well… anything else without buying out another company? However, the chances of a buyout happening are dissolving now that the Federal Trade Commission filed suit against Meta saying that previously approved buyouts of Instagram and WhatsApp were part of a “systemic strategy” to maintain a monopoly. While they can keep copying others as a means to stay relevant, a better choice would be to start thinking one step ahead of their competition to gain the much-needed momentum to follow through with the metaverse.
CNBC reported that slowing sales and the Apple effect are what Meta is pointing that big blue finger at for the sudden stock decline. CNBC states “[Meta] said it’s taking a big hit from Apple’s privacy changes and showed the first quarterly decline in daily active users on record.” This results in the drop of “more than $230 billion from its market cap, bringing it to about $660 billion”. There are only so many people in the world after all and let’s face it the kids are choosing TikTok over Facebook. Who can blame them? With all of Facebook’s bad publicity, it’s not a surprise they changed their name. The Apple effect is referencing the money that Meta made off of ads and how Apple’s changes in privacy settings for their devices have caused users to be able to opt out of whether advertisers could track them. This of course hits Meta hard because they rely on ad revenue. So, if you’re planning to reach younger generations you might want to reevaluate how you check that off your to-do list.
Interestingly enough, this could all be a happy ploy for Meta. Specifically, because if they can get to and stay below $600 billion, Meta could avoid pushback on antitrust laws. They could potentially avoid implications regarding how they conduct business and make deals, e.g., mergers and buyouts. Whereas, other larger companies, such as Amazon, Alphabet (Google), Apple, and Microsoft, all become subject to the new rules governing their business actions.
The other option written by protocol article says the “signs [that Facebook is dying] have been out there for a while.” Slow growth, new refocused energy on the Metaverse, and changing their name from Facebook to Meta are some of the reasons listed for diseased Facebook’s eventual death. However slow their growth has been up to this point, the relevant issue here is seeing a real financial decline. While there are only so many people in the world and younger generations are opting for other social platforms, one would think that financial decline would happen over a longer period of time versus such a big chunk in one quarter. What happens if Facebook dies? I mean we all remember the day it went down for a few hours, right? How did you reach your customers? It’s always good to not put all your eggs in one basket, as they say, and the same goes for marketing and reaching your customers.
You may be wondering why these matters are important and the answer, Karen, is that by examining current events within bigger companies, entrepreneurs can identify business opportunities, forecast business changes and adjust accordingly, and build new, strategic partnerships. Regardless of whether we see quarter-over-quarter declines for Meta, the reasons listed above may give insight into what’s happening, why it’s happening, and what it means for the rest of us.