In this earnings season that is more exciting than a roller coaster, whenever the technology giants announce their results, many people have to take heart-saving pills.
On Wednesday, US time, Meta released quarterly data, the company's growth in the world for the first time stagnated, focusing on the main meta-universe project is even more "hot eyes".
According to its earnings report, Reality Labs, the company's "meta-universe" division, has made huge and growing losses over the past year, with annual revenues of less than $2.3 billion and losses of up to $10.2 billion, compared with $3.3 billion in the fourth quarter alone.
In 2019 and 2020, Reality Labs had revenue of $500 million and $1.14 billion, respectively, and losses of $4.5 billion and $6.6 billion, respectively.
According to Meta, the operating loss in 2022 will also increase significantly.
Prior to this, Meta had issued an alert that the current quarter could be the slowest growth period ever.
In response, Wall Street reacted with horror, like a signal bomb, the market suddenly sold off on a large scale, Meta's stock price plummeted 26.39% after hours on Thursday, the market value evaporated by $252 billion, the largest one-day decline since the listing, and brought down the stock prices of social media companies.
At present, its stock price has fallen by 37.33% compared with the high of September last year. Zuckerberg's personal wealth also shrank from $121 billion before the earnings report to $92 billion.
On the same day, Snap shares fell 23.6 percent, Spotify fell less than expected, down 16.76 percent, Pinteres 10.32 percent and Twitter down 5.56 percent.
The sharp decline in social media has also triggered an overall decline in technology stocks.
Fearing higher interest rates, U.S. stock investors have been dumping tech stocks and stocks at other high-growth companies over the past few months. At present, compared with the record high set in November last year, the Nasdaq index has fallen by 13.57%.
Recently, the upward momentum brought about by the optimistic performance of other large technology companies has been contained by Meta's own efforts, and the four consecutive gains have ended.
Why is it so tragic?
01
Internal and external troubles
An anonymous attendee at the earnings conference revealed that Zuckerberg looked red in the eye and rarely wore glasses. The audience was told he might shed tears because he scratched his own eyes.
At the meeting, Zuckerberg repeatedly mentioned the strength of his opponents.
"People now have too many options for spending their time, and apps like TikTok are growing too fast, which is why our efforts on Reels are important in the long run."
For Facebook, TikTok is undoubtedly a formidable adversary and can continue to grow rapidly on top of its huge user base.
Fresh gameplay, negative news such as privacy scandals have led to a large number of young users turning to competitive platforms such as TikTok.
According to a survey by research firm Forrester, in 2021, the number of people aged 12-17 in the United States has surpassed Instagram in the weekly use of TikTok.
Last year, Zuckerberg announced that it would make the short-form video app Reels a more central part of Facebook's product experience for serving younger users, trying to replicate TikTok's success.
Such a shift is undoubtedly a shift to a less profitable business model. In short video platforms. Advertising in videos generates significantly lower revenue than Facebook's original model.
But in the case of living space being squeezed, this is a way to fight fires.
TikTok monthly active user distribution, source: Orient Securities
In fact, in the past few years, Facebook's user growth in Europe and the United States has been stagnant, but this decline has been compensated by the continuous user growth in emerging markets.
However, in the fourth quarter of 2021, most of the 500,000 users Facebook lost came from emerging markets such as India, Latin America and Africa, which also shows a cliché - its products have reached global saturation, and the platform's daily active users have now seen pure negative growth.
Facebook active user data, source: Essence International Securities
At the same time, according to tens of thousands of pages of internal Facebook documents published by whistleblower Francis Haugegan, it shows that the platform's algorithms have increased the exposure of fake news, exacerbated social divisions in the United States, allowed violent organizations to use the platform, and so on.
As a result, Meta is facing antitrust litigation cases that have a significant impact on the business in the United States and even in Europe.
These irreversible political pressures have led it to abandon even cryptocurrency projects.
All of the above is why Zuckerberg is desperate to throw new fields such as the metaverse.
As Rich Greenfield, a partner at consultancy LightShed, put it, Meta's profit performance this time was astounding, and no one could have predicted that Meta was in danger of life and death.
"Meta is being forced to create something that is not transparent (metaverse) until it blossoms decades later."
Zuckerberg warned last quarter that metaverse's investment "won't bring us profits in the short term."
The company has invested significant efforts in transforming into a hardware giant, including changing the name Meta and hiring tens of thousands of new employees, but this transformation is still in the early stages.
The construction of the metaverse scene may take 5-10 years or even longer. Perhaps only giants like Meta have enough time to find new development strategies and sources of growth.
From this point of view, Meta's huge investment in the metacosm also reflects its advantages, compared with small companies, companies with strong balance sheets have a steady stream of financial strength.
When and whether the metaverse in Zuckerberg's mind will become and whether it will succeed is still a difficult question to answer.
Could it be that, as he said at the earnings video conference, "Last year was the foundation for our efforts to move forward, and this year was the year of real implementation efforts." ”
Will there be surprises in the new year?
02
Subject to people
Meta, which started as a social software, has gone through 18 years, spanning the two eras of PC Internet and mobile Internet.
But for a long time, whether on the operating system or in the terminal hardware, it has been shown as a "sojourner". Although this positioning can save huge R&D costs, it is also extremely dependent on companies that provide system services and hardware products.
For example, in addition to the expense of building the metacosm, changes in the privacy policies of platforms such as Apple and Google have made it more difficult for software such as Facebook to track users and target ads, with an impact on Meta's revenue.
It is expected that Meta's sales will decrease by about $10 billion in 2022 because of the privacy policy alone.
In particular, the adjustment of the iOS privacy policy has been a devastating blow to Meta's business model.
For the vast number of advertisers at Meta and Snap, they are now spending the same amount of money, but the advertising effect is far less than it used to be. At this time, they only have two choices: the first is to spend more money to achieve the original advertising effect; the second is to turn to other types of advertising platforms - e-commerce companies with huge user shopping data represented by Amazon, and search advertising platforms represented by Google.
Facebook ad price and exposure year-on-year (%), source: CITIC Securities
What's the difference?
Facebook's algorithm actually analyzes the collected user data, and then responds to the push ads and content, saving users the step of active search.
On Amazon and Google, whether through categorization or search, users must first express their needs in order to find the products and content they want.
Therefore, the same advertising content, in the context of the new privacy policy of iOS and the strengthening of data supervision, based on the recommendation of the core search-based advertising model, the former has undoubtedly been greatly affected.
But in the face of the world's second-largest operating system after Android, Meta has no bargaining power at all.
At the same time, macroeconomic factors such as supply chain disruptions and inflation have also affected advertisers' budgets.
In terms of hardware, although Meta is the first in the next generation of smart terminals, VR headset shipments are far ahead of the world, and the shipment of Quest 2 has exceeded 10 million units.
But these products are still based on the Android operating system VRO, and every time Google updates the Android system, VROS needs to spend a lot of time to upgrade. This makes it difficult for Meta to form its own ecological closed loop.
Since 2017, Meta has begun to develop its own operating system, with the intention of getting rid of apple and Google constraints and embarking on the road of independence and autonomy.
This drama has been staged countless times over the years, and many companies, including Microsoft, have tried to break the monopoly on the operating system, but all of them have failed.
Here I have to sigh that the reason why Apple and Google are first-class companies is because they have the most core barriers.
Google is a true technology-driven company, discovering ways to change the world from technological changes; Apple is pursuing the ultimate in hardware-forming barriers and user experience for a long time.
Neither of these can be turned back at present.
Meta may be a geek, but it is still not at the forefront of technology. If you want to find technology with application traction, the difficulty itself is greater.
But in today's era of more and more frequent iteration of technology, as long as you can catch the ark that has entered the new era, the curve overtaking is only between electric light and flint.
If the metaverse construction that Meta bets on can really have a major breakthrough, can it replicate Apple's miracle that has surpassed the world in the era of mobile Internet?
03
End
Chinese pay attention to the middle way, things are slow and round, for example, Tencent's reduction in JD.com is not ambiguous at all.
But Americans probably don't believe this.
Under the wave of anti-monopoly on a global scale, Meta, which has been exhausted, not only has to face the pace of competitors, but also has to come up with a concept, desperately, to complete the tall but difficult transformation of the metaverse.
Building a metaverse is an expensive gamble.
But this is a matter of corporate strategy, yes and no bad evaluation, can only let time to verify.
As buffett praised in an interview a decade ago as an "extraordinary business," he couldn't be sure how the company would perform over the next 5 or 10 years, so he wouldn't invest.
"It's a lot easier for me to figure out the value of Coca-Cola than it is to figure out Google or Facebook. I'm not saying they won't have a brilliant future, I just can't make a judgment. ”
You can say he stuck in his tracks and missed the times, but he also had to praise "steady as an old dog".