Business

6 Reasons Meta is in Trouble

Meta, the company formerly known as Facebook, suffered its biggest single-day writedown ever on Thursday as its stock plummeted 26% and market value fell by more than $230 billion.

Its breakdown then a dismal earnings report on Wednesday, when Mark Zuckerberg, chief executive officer, presented how the company navigates a complicated transition from social networks to the so-called virtual world of the metaverse. On Thursday, a company spokesman reiterated statements from its earnings announcement and declined to comment further.

Here are 6 reasons why Meta is in a tough spot.

The era of Facebook’s wild user growth is over.

Although the company on Wednesday recorded a modest increase in new users across its so-called family of apps – which includes Instagram, Messenger and WhatsApp – its core Facebook social networking app has lost about half a million users in the fourth quarter compared to the previous quarter.

It was the company’s first decline in its 18-year history, during which time it has practically been defined by its ability to bring in more new users. The drop signals that the core application may have peaked. Meta’s quarterly user growth was also its slowest in at least three years.

Meta executives have pointed to other growth opportunities, like turning on the money faucet at WhatsApp, the messaging service that has yet to generate significant revenue. But those efforts are preliminary. Potential investors will next scrutinize whether other Meta apps, such as Instagram, can start to hit the top spot in terms of user growth.

Last spring, Apple introduced a “Transparency of App Tracking“The update to its mobile operating system essentially allows iPhone owners to choose whether they allow apps like Facebook to monitor their online activities. Those privacy moves are now compromised Meta’s business and is likely to continue to do so.

Now that Facebook and other apps must explicitly ask people for permission to track their behavior, many users have opted out. That means less user data for Facebook, making it harder to target ads – one of the company’s main ways of making money.

Doubly painful is that iPhone users are a much more lucrative market for Facebook advertisers than Android app users. People who use iPhones to access the Internet generally spend more money on products and apps served to them from mobile advertising.

Meta said Wednesday that Apple’s changes will cost $10 billion in revenue next year. The company has opposed Apple’s change, saying it’s not good for small businesses that rely on social media ads to reach customers. But Apple is unlikely to reverse its privacy changes, and Meta shareholders know it.

Meta’s troubles are the fortunes of its competitors.

On Wednesday, David Wehner, Meta’s chief financial officer, noted that as Apple’s changes make advertisers less visible to user behavior, many have begun shifting their ad budgets. to other platforms. Specifically Google.

In Google earnings call This week, the company reported record sales, especially in e-commerce search ads. It’s the same category that stumbled on Meta in the last three months of 2021.

Unlike Meta, Google is not heavily reliant on Apple for user data. Wehner said it is likely that Google has “more third-party data for measurement and optimization purposes” than Meta’s advertising platform.

Wehner also pointed to Google’s agreement with Apple to become the default search engine for Apple’s Safari browser. That means Google search ads tend to appear in more places, capturing more data that can be useful to advertisers. That’s a big deal for Meta in the long term, especially if more advertisers turn to Google search ads.

For more than a year, Zuckerberg has shown just how formidable an enemy TikTok is. The Chinese-backed app has grown to more than a billion users thanks to its surprisingly addictive and highly shareable short video posts. And it is fiercely competing with Meta’s Instagram for eyeballs and attention.

Meta cloned TikTok with a video product feature called Instagram Reels. Mr. Zuckerberg said on Wednesday that Reels, which is featured prominently in people’s Instagram feeds, is now the #1 driver of engagement on the app.

The problem is that while Reels can attract users, it doesn’t monetize as effectively as other Instagram features, like Stories and main feed. That’s because it’s slower to monetize video ads, as people tend to ignore them. That means the more Instagram drives people to use Stories, the less money it can make from those users.

Mr. Zuckerberg compared the situation to a similar time a few years ago when Instagram introduced its Stories , which is a Snapchat clone. The product also didn’t make a lot of money for the company when it launched, although eventually advertising dollars went up. However, there’s no guarantee Instagram Reels can repeat that miracle.

Zuckerberg believes that the next generation of the Internet is the metaverse – a still fuzzy and theoretical concept that involves people moving through different virtual and augmented reality worlds – so much so that he He’s willing to pay big for it.

So large that the amount spent amounted to more than 10 billion USD last year. Zuckerberg is expected to spend more in the future.

However, there is no proof the bet will succeed. Unlike Facebook’s shift to mobile devices in 2012, virtual reality use is still the domain of niche hobbyists and hasn’t really gone mainstream yet. The popular augmented reality headset is also months – if not years – to launch.

In essence, Zuckerberg is asking employees, users, and investors to believe in him and his super-reverse vision. That’s a big ask for something that will cost the company billions of dollars in the years to come, and that may never come to fruition.

The threat from Washington regulators to Zuckerberg’s company is a headache that won’t go away.

Meta faces multiple investigations, including from the newly-aggressive Federal Trade Commission and multiple states’ attorneys general, into whether it acted in an anticompetitive manner. Lawmakers have also collaborated around Congress’s effort to pass antitrust bills.

Zuckerberg has argued that Meta is not an exclusive social network. He angrily pointed out what he calls an “unprecedented level of competition,” including from TikTok, Apple, Google and other future competitors.

But the threat of antitrust action has made it harder for Meta to tap into new social media trends. In the past, Facebook bought Instagram and WhatsApp without scrutiny, as these services already amassed billions of users. Now, even some of Meta’s seemingly less controversial acquisitions in virtual reality and the GIF is already challenges by regulatory authorities around the world.

With less ability to execute trades, Meta had to innovate its way out of any challenge.

In the past, Zuckerberg may have benefited from doubts that he could do so. But at least on Thursday, confidence was in short supply on Wall Street.

https://www.nytimes.com/2022/02/03/technology/facebook-meta-challenges.html 6 Reasons Meta is in Trouble

Fry Electronics Team

Fry Electronics.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@fry-electronics.com. The content will be deleted within 24 hours.

Related Articles

Back to top button