Things are certainly not going well with Meta Platforms. It is facing many issues all at once and there isn’t anything positive to look upon at the moment.
First, Apple has tightened the privacy on iPhones, giving the option for users to prevent apps from tracking them across other apps since last year.
The problem has plagued Meta as it relies on user tracking in order to help advertisers target accurately. Without which, advertisers find the ads less cost effective and likely to spend less as a result.
Meta has not resolved this and it estimated this would shave off $10 billion from its revenue this year.
Second, TikTok has emerged as a credible competitor. For many years, Meta was able to fend off new challengers by either acquiring them (Instagram) or copying them (stories from Snap), while some others (Clubhouse) just faded away.
But TikTok is a different story. It is growing fast and has hit 1 billion monthly active users in 5.1 years, much faster than 8.7 years taken by Facebook.
A user spent an average of 25.7 hours per month on TikTok in 2021. This is higher than Facebook and Instagram combined at 23.9 hours. TikTok has proven to be more engaging and addictive. Advertising dollars flows where attention goes.
Facebook and Instagram Reels are a copy of TikTok and they appear to retain users instead of attracting new ones. Facebook also saw a dip in the monthly active users for the first time last quarter.
Third, the economy is slowing down and advertising spend is reducing. This impacts all advertising companies and thus not limited to Meta. But Meta is the second largest advertising platform after Google so the impact is significant.
The media reported that Facebook is looking to sack 15% of the employees, or 12,000 of them to cut costs.
Fourth, Zuckerberg is making a big bet on the metaverse and said Meta would lose “significant” amounts of money on the project in the next 3 to 5 years
This bet is not only uncertain, but will cost significant billions of dollars. It could all fail and make Meta worse off – Meta had a series of failures – Libra crypto project and Facebook/Instagram shops are recent examples.
The recent selfie of Zuckerberg in the metaverse became a laughing stock in the internet due to the rudimentary graphics. Although it is still in the early phase of the project, it doesn’t inspire confidence when such incident occurs.
It looks like a perfect storm for Meta and its share price has fallen 60% this year, the worst among the big tech and even worse than Bitcoin’s 57% decline.
The current share price is also below the Covid low and if you have bought Meta five years ago, you would be sitting on a 22% loss. Few can stomach it.
The share price is a reflection of the troubles in Meta. More importantly, can it turn around?
Everything hinges on the success of the metaverse. It is the biggest pivot in Meta’s history. Zuckerberg is serious about it so much so that he took the trouble to rename the company and its ticker.
A bet on Meta is a bet on Zuckerberg, the youngest founder in a big tech company who is still the CEO. Apple, Amazon, Microsoft and Alphabet have all bade farewell to their founders. Elon Musk is still with Tesla but he is 13 years older than Zuckerberg.
Being the youngest, Zuckerberg should still possess the energy and dynamism to drive Meta to his new vision. The odds are not on his side as is the case in every business, but he has that sliver of chance. He has to make it or break it.
