Meta has opened the stock market this Thursday with its share plummeting more than 20%. Its market capitalization is therefore $200 million lower, marking the largest single-day loss in market value in US history. Investors were surprised last night with a sharper-than-expected drop in earnings and less-than-expected forecasts following the announcement of Facebook’s ambitious changes to Meta.
The crash makes the name change of the company announced a few weeks ago more understandable and why all efforts would be focused from that moment on the creation of the metaverse, a kind of internet where content is not consumed, it is lived through reality experiences virtual. Mark Zuckerberg was aware that, in order to keep his laurel crown, he had to start an ambitious reform of his empire as soon as possible.
Facebook loses users for the first time in its history
Facebook’s results have always given joy to its shareholders, showing great performance in its two most important metrics: acquisition of new users and income obtained from each of these. However, both metrics have been seriously affected this last year and in the forecast for the next ones.
Facebook, its main social network and business, loses daily active users for the first time in its history. The slowdown is clear and inevitable. The number of people connected to the Internet is a finite number, but starting to lose users is a serious indicator that something is wrong. The biggest loss also occurs in the markets where it could still grow.
Although it is its most lucrative business, Meta has more social networks and services such as Instagram or WhatsApp. However, in addition to not bringing in as much revenue as Facebook, we can see that they suffer from the same problem: growth is stagnating. These are figures that show a trend that could be observed for months: young people see Facebook as an application for older men, and Instagram is beginning to enter into the same dynamic. Now the one who triumphs is TikTok, something that Zuckerberg himself has recognized in the call with investors, pointing to it as his main rival.
As if that were not enough, one of the virtues of its business, extracting a lot of money from each of its users through advertising, has been substantially damaged by the privacy measures that Apple offers in its latest operating system for iPhone. It is more difficult to know the interests of consumers and, therefore, less profitable to direct advertising to them. David Wehner, CFO of the company, has indicated that the possibility of restricting the tracking of applications in iOS will result in a loss of 10,000 million dollars in revenue throughout 2022.
You can have the most valuable merchandise in the world, but if your rivals control the ships that carry them, you are going to have problems sooner or later.
A multitude of open fronts and a single bet
One might think that, despite the poor results, Meta is too big, influential and powerful a multinational to fail. But so was the Roman Empire, and it fell. Its decline was a consequence of the accumulation of numerous open fronts that were poorly tackled, and Zuckerberg is accumulating too many.
Meta has a hard time attracting new users with innovative features. The novelties it presents are usually copies of rival successes. First with the stories within Instagram, cleverly adopting the main claim of its rival Snapchat; and, now, copying the TikTok short video format with Reels. This integration is working well, Zuckerberg has said. But no advertising is included between the videos yet, so its ability to generate revenue is limited. Still, falling behind rivals in innovation, and hoping your massive user base will still suffice, is risky.
On the other hand, the media and governments are constantly scrutinizing their social networks. It is increasingly difficult to defend its mission as a developer of services that connect people with their friends and family when what is evident is that, mainly, they are connected with populist speeches, radical opinions and disinformation thanks to the operation of its algorithms, designed to show you content that you are most likely to react to.
Finally, Zuckerberg’s empire expanded and culminated on the platforms of his rivals. Whoever accesses its applications and services does so through an Apple phone, a Google phone or a Microsoft computer.
Building a new empire using the revenues of the old one is Zuckerberg’s solution to all these challenges: attract a new, cutting-edge approach, silence criticism with a facelift by changing the company’s name; and, finally, become an application, service and platform controlling everything.
The great and difficult reform of Zuckerberg
Reforming the empire takes time, and is very expensive. This year, Meta has invested 10,000 million dollars in the metaverse, a business that they hope will see the light in ten or fifteen years. At the moment it’s just a bunch of advances behind closed doors in hardware and software and some demonstrations that raise more eyebrows than open mouths.
Meta has almost 70,000 employees, and its business was mainly focused on the sale of online advertising and social networks. The change, if all this digital worlds succeed, would offer him a privileged position at the beginning of the race; but perhaps at a very high price. The future of the multinational is being risked, and no one is going to object to its leader; no matter what happens, the directive is designed to withstand the bad results that are coming and that Zuckerberg’s vision prevails.
“While some workers were excited about Meta’s turnaround, others questioned whether the company was rushing to launch a new product without addressing issues like misinformation and extremism on its social platforms. Workers were expected to adopt a positive attitude toward innovation or leave,” one employee told The New York Times anonymously, “and some who didn’t agree with the new mission left.
Meta will be able to withstand the coming results, which shareholders will not like very much, but it will be difficult for it to retain the necessary talent in the development of the necessary miracles in software and hardware for the creation of its metaverse. Many companies are interested in augmented reality or virtual reality technologies, and have a more attractive culture, such as Epic Games or Microsoft after the acquisition of Activision Blizzard.
Will Zuckerberg’s empire be able to sustain itself under promises and illusions until they are fulfilled? Because, at the moment, this whole metaverse thing is just that: an illusion. But their problems are already real, and they translate into numbers and losses.
