Product | Heterogeneous Finance
Author | Ghost god pre-ghost
After the U.S. stock market on Wednesday, February 2, Beijing time, Facebook's parent company Meta announced the financial results report for fiscal 2021 Q4, which was the first financial report released after Facebook's parent company changed its name to Meta Platforms in October last year, and disclosed the performance of the meta-universe business.
The data disclosed in the financial report was weaker than expected, and the company's business data was even more worrying to the market, and after the release of the financial report, Meta's plunge, the market value evaporated nearly $180 billion.
Metacosm is not the "antidote"
Previously, affected by negative news such as antitrust, youth protection, data security and privacy questions, the image of Facebook and Zuckerberg in the public mind fell to the bottom, perhaps to save the corporate image, Facebook changed its name to Meta in October last year, and bet heavily on the meta-universe business as the company's next growth point.
Meta's new earnings structure consists of two parts, one is the "app family" that includes Facebook, Instagram, Messenger, WhatsApp and other services, and the second is FRL (Reality Labs), which includes hardware, software and content related to AR (augmented reality) and VR (virtual reality).
Judging from the financial report data disclosed in this quarter, the revenue contributed by Metacosm to the company is negligible, and it is difficult to become a new growth engine for the company in the short term.
According to the financial report, from the annual data, in 2019, 2020 and 2021, the revenue of "Reality Labs" was $501 million, $1.14 billion and $2.27 billion, respectively, all of which maintained good growth.
In the fourth quarter of 2021, the Meta Meta Universe business "Reality Labs" revenue was $877 million, an increase of 22.3% year-on-year and 57.2% sequentially, and the Meta universe business contributed only 2.6% of the company's revenue in the fourth quarter.
Meta's Reality Labs primarily includes consumer hardware, software, and content related to enhanced and virtual displays. In Q4 2021, the revenue of this business increased significantly, which has a certain relationship with the hot sale of Quest 2 during Christmas last year. SteamVR data shows that Quest2 has risen rapidly from 33% at the end of September last year to 39% at the end of December. If you add Rift's data, the overall Oculus market share of more than 50% of the meta-universe business revenue growth, "Reality Labs" operating losses also showed a trend of expansion. The data shows that "Reality Labs" (Reality Labs) lost $10.19 billion in 2021, up from an operating loss of $6.62 billion in 2020 and a loss of $4.5 billion in 2019, respectively.
Zuckerberg has previously said that in the next three years, Facebook's focus will be on product improvements and infrastructure construction, including the improvement of hardware and various functions. That is to say, at least in the next three years, Meta's meta-universe business will require long-term capital investment, and the possibility of profitability is very small, which will undoubtedly compress Meta's profit margins and put pressure on Meta's cash flow. Keberg previously mentioned that in the next 1-3 years, Facebook will be in the stage of laying the foundation in the metacosm, and the investment in the metacosm will not be profitable in the short term.
The investment period will inevitably lead to an increase in costs and expenses.
According to the financial report, Meta's total costs and expenses in Q4 2021 were $210.886 billion, up 38% year-on-year and 13% month-on-month. Among them, the operating cost was $6.348 billion, an increase of 22% year-on-year, an increase of 10% month-on-month, the operating cost ratio was 19%, slightly lower than the previous quarter's 20%; research and development expenses were 7.046 billion US dollars, an increase of 35% year-on-year, an increase of 12% month-on-month, the research and development expense ratio was 21%, slightly lower than the previous quarter's 22%; marketing expenses were 4.387 billion US dollars, an increase of 34% year-on-year, an increase of 23% month-on-month, and the marketing expense ratio was 13%, slightly higher than the previous quarter's 12% Administrative expenses increased 107% year-over-year to 12% sequentially at $3,305 million, and the administrative expense ratio was 10%, unchanged from the previous quarter.
As can be seen from the above figure, on the whole, the expense rates remain in a relatively stable state, but from the perspective of the chain comparison, the expense rates have increased to varying degrees, of which the administrative management costs have increased the most, which is directly related to the increase in the number of employees in the company. The financial report disclosed that as of the end of the fourth quarter, the company had 71,970 employees, an increase of 23% year-on-year. In the future, the focus will be on the metacosm, and the increase in the cost and cost of the investment period may further promote the continuous improvement of the expense rate.
The continuous large expenditure of funds, the expense ratio is bound to squeeze the company's profit margins
According to the data, in Q4 2021, the company's net profit was $10.285 billion, down 8% from $11.219 billion in the same period last year, which is the first time since Q2 2019 that the company's net profit has declined year-on-year.
As of December 31, 2021, Facebook had cash and cash equivalents and securities totaling $48 billion, down $10.08 billion from $58.08 billion in the previous quarter.
Meta's core advertising business is under pressure to grow
According to the above analysis, the meta-universe business contributes very little to the company's revenue, so for a long time, Meta's revenue still needs to rely on the core advertising business, but the growth of Meta's core advertising business has shown a "decline", which directly leads to the slowdown in the company's overall revenue growth.
According to the financial report, in Q4 2021, Meta's revenue was $33.67 billion, slightly higher than analysts' expectations of $33.4 billion, an increase of 20% year-on-year, first than the first three quarters of last year, the revenue growth rate was significantly slower.
According to the financial report, in Q4 of 2021, Meta advertising revenue was $32.639 billion, an increase of 20% year-on-year, which is consistent with the growth rate of total revenue.
There are three reasons behind the slowdown in revenue growth in the core advertising business:
The first is the macro environment. Companies warn of negative impacts on advertisers' budgets from high inflation and supply chain bottlenecks;
The second is caused by the poor key user indicators of its own. Facebook's daily active users in the fourth quarter were 1.93 billion, unchanged from the previous quarter, up 5% year-on-year and weaker than the market expectation of 1.95 billion. The monthly active users who are more concerned are 2.91 billion, also flat in the third quarter, up 4% year-on-year, and expected to be 2.95 billion. Another core metric that measures the ability to monetize the user base is $11.57 per user average revenue (ARPU), up 14 percent year-over-year and slightly above expectations of $11.38.
The third is the competition for young users, and the competitive pressure caused by opponents such as Snap to Meta.
Previously, Facebook has been heavily criticized for aging, becoming increasingly unpopular among teenagers and young adults, and the number of newly registered teenagers is also declining. In the competition for young users, Snap is its biggest competitor.
In order to attract more young users aged 18-29 to use the product, the company focused on building product features and launched Reels last August, but Reels is far less massive than TikTok. The company also warned users that the monetization ability of short video products they prefer is weaker than other mature features.
In summary, Meta is facing a slowdown in the growth of its core advertising business, and the meta-universe business is not yet mature, and it cannot shoulder the future mission of the second growth potential in the short term.