Download CRED
Meta gets worse

Meta gets worse

a drop in users for the first time ever in its history is an ominous sign for Big Tech
February 8, 2022
1 min read
share facebookshare twittershare linkedinshare whatsapp

a drop in users for the first time ever in its history is an ominous sign for Big Tech

share facebookshare twittershare linkedin

$240 billion is a huge amount of money. to put it into context, India’s largest conglomerate, Reliance Industries, with all its heft is presently valued just short of that amount. so when a company loses that amount of value in a single day, one can imagine the shockwaves. Facebook’s avatar change to Meta appears to have failed to avert a looming crisis as its share price crashed in excess of 26% on February 3 following its quarterly report.

what drove the biggest single-day slide in value for a company in US history?

tiktok on the clock

the primary factor was the social media giant’s flagship platform, Facebook, reporting a decline in daily active users from the previous quarter for the first time ever. Facebook also lost about half a million users over the preceding quarter, another first in its 18-year history. this directly affects the growth projections for Meta’s chief source of income, ad revenue.

not only are younger users deserting the platform, it’s also being squeezed in the effort to deliver impactful ads by Apple’s new privacy changes. Meta’s loss has proven to be Apple’s gain as it has started to show significant growth in ad revenues while the main competitor Google has also managed to weasel away market share from Meta. 

however, the biggest threat to Meta might prove to be the challenger from China that is extremely popular with Gen Z, the very audience that it now hopes to regain through prioritising Instagram Reels. not only has TikTok taken away new users, it is also growing its revenues at breakneck pace. this is something that Reels has failed to meaningfully achieve thus far.

construction costs

while Meta’s income growth looks set to shrink, its bills are set to explode. after all, its pivot to a metaverse company is in a way based on the philosophy of “build it and they will come”. while the Oculus division (hardware) is performing fairly well, the software aspect of the metaverse will require unprecedented investment in the field. even then, there’s no guarantee of success as shown by the fact that Meta has already lost $10 billion on its investments on the metaverse.

Mark Zuckerberg perhaps saw the writing on the wall when he decided to pivot the behemoth organisation towards a whole new frontier. It is punishing the company’s stock in the short term and nothing but resounding success in its metaverse endeavours will revive that in the long term. that, and forcing more Reels onto your Instagram feed.