By Will Brown
With a fresh name change and an announcement of a major expansion into the Metaverse, Meta (formerly Facebook) might have expected its Q4 earnings to be quite positive. They were not.
After seventeen years of seemingly endless growth, the number of total users globally on Facebook has fallen for the first time—Facebook is officially in decline. Poor earnings reports are usually accompanied by a drop in the stock price, but it is unlikely that anyone at Meta was expecting what followed on the 3rd of February. The stock price fell 27% from $323 to $237, wiping out over $230 billion (more than most companies are worth in their entirety) in a single day. But there is more to that drop than declining users: Meta is in serious trouble, and investors are starting to realise that.
Facebook relies on advertising, and by extension our attention. Both are in trouble. Recently, Apple has been heavily marketing privacy as a benefit of their products, with last year’s iOS 14 requiring Facebook to get permission to track their users’ activity—unsurprisingly, most people declined. Explaining the problem to investors, Meta’s CFO said he expected Apple’s changes would cost Meta $10 billion in advertising revenue.
As for our attention, Meta is fighting a losing battle. Zuckerberg admitted that Meta is struggling to keep up with TikTok, which has soared in popularity since its worldwide release in 2018 to become the third-largest social network—effortlessly attracting the attention of teenagers and young adults whilst Instagram shamelessly introduced Reels in a desperate attempt to hold onto its younger users.
If the US Federal Trade Commission (FTC) get their way, Meta won’t be able to rely on Instagram for much longer—the government agency is arguing that Meta currently has a monopoly and should be forced to sell off both Instagram and WhatsApp. After a failed first attempt, the FTC re-filed its case last August. Last month, a federal judge ruled that they can proceed—rejecting Meta’s request for the case to be thrown out. It will undoubtedly be a tough battle for the FTC, but if they are successful then Meta will be in serious danger; last week’s drop in stock price would look benign in comparison.
All of Meta’s current issues are evident in their push towards the Metaverse. After spending years struggling against the demands of iOS and Android, Meta is now focusing on hardware that they can control. When Facebook purchased virtual reality company Oculus back in 2014 it was seen as an odd move for the company, but it’s now clear the benefits it can provide—there’s no risk of advertising being restricted on Meta’s own platform.
It’s also hoped that virtual reality is going to draw younger generations in. But Meta’s main problem is that as much as they’re pushing the concept, we’re not ready for a Metaverse. Virtual reality is still a niche technology, and it might take some time for it to become as ubiquitous as the smartphone. Stock prices illustrate how risky this move has been, but it’s not as risky as the status quo. People are still using iPhones, Amazon, and Google—but people are stopping using Facebook. That makes Zuckerberg the weakest link in the Big Four.
Facebook now conjures up images of misinformation, data harvesting, and boomer humour. It’s a tainted brand, and Zuckerberg knows it. In the hopes that the Metaverse will appeal to a younger audience, his change in direction is a bid for his company to survive. Facebook might die, but Zuckerberg hopes that Meta will rise from its ashes. Only time will tell if he’s right.
Image: Rawpixel via Wikimedia Commons