Facebook mom Meta saw investors fleeing Thursday rather than pinning themselves for what could be a long drive into the company’s metaverse vision of the future of the internet.
While the tech titan has seen stocks soar despite fines, regulatory threats, misinformation and harassment issues, this time they plummeted into what one analyst called “a perfect storm.”
Here are the key factors rocking trust in the social media giant:
TikTok to Telegram
Facebook’s growth, which has shown a seemingly perpetual upward trend, slipped late last year, with the number of people using the social network on a daily basis declining.
Meta executives warned of increased competition, especially from video star TikTok and messaging services such as Telegram and Slack.
The company is making it a priority to invest in Reels’ short video feature, as well as apps like WhatsApp and Instagram to keep up with users.
That means spending a lot of money on services that are harder to earn than the social network Facebook with its digital advertising machine.
Meta executives told analysts that the efficiency of Facebook’s ad targeting is being undermined by a change Apple made to its software for iPhones.
In the iOS update, Apple required application publishers to ask for permission before collecting data, much to the regret of companies like Meta who rely on it for ad targeting.
Because iPhone users opt out of data sharing for targeted advertising in Facebook apps, marketing messages become less precisely targeted and thus less profitable.
“We believe the impact of iOS as a headwind for our business will be in the order of $10 billion by 2022,” said David Wehner, Meta’s chief financial officer during an earnings call.
“So that’s a pretty big headwind for our business.”
Advertising at Meta also suffered from the broader market, as companies cut budgets in the face of delivery issues, employee turnover and pandemic woes.
Meta is facing a “perfect storm” that is holding back growth, according to Baird Equity Research analyst Colin Sebastian.
“Our concerns about the near-term growth prospects for Meta were not only realized, but worse than we thought,” Colin Sebastian said in a note to investors.
Bet on the metaverse
Meta CEO Mark Zuckerberg portrays the metaverse as the future of Internet life. In that spirit, the tech company changed its name to “Meta”.
Creating the immersive online world of the metaverse is expected to take many years and cost many billions.
A “Reality Labs” unit at Meta dedicated to technology for blending real and virtual worlds reported a loss of $10 billion last year, according to an earnings release.
Large stock market investors are notoriously averse to waiting for big returns, and tend to trade stocks based on the potential for quick profits.
While Meta appears to be making a “transformation” to better compete with TikTok, a hit with younger users, regulators in the United States and elsewhere have vowed to curb its power.
A federal judge ruled in January that the US regulators’ reworked antitrust case against Facebook can go ahead, saying the complaint was more robust and detailed than the version that was denied in 2021.
The US Federal Trade Commission has claimed that Meta has an illegal monopoly by acquiring potential competitors it now owns, such as Instagram and WhatsApp.
The lawsuit, which could take years to go through the courts without a settlement, called for the “disposal of assets”, including WhatsApp and Instagram, to restore competition.
(Except for the headline, this story has not been edited by DailyExpertNews staff and has been published from a syndicated feed.)