Reporting by XinZhiyuan
Edit: Peach La Yan
The stock price plummeted 26%, the market value evaporated by more than $200 billion, and Facebook's first financial report after changing its name to Meta was tragically waterloo. These are the top six reasons why Meta is in trouble.
No one expected that facebook's first financial report after changing its name to Meta was "angry" Xiao Za.
First, on Wednesday, Meta's latest quarterly earnings report showed that its Facebook daily active users fell for the first time in a row, and the much-watched Reality Labs division lost $10 billion.
On Thursday, Meta's stock plunged 26 percent, shrinking its market value by more than $230 billion, its biggest one-day loss in the company's 18-year history.
Recently, the New York Times analyzed 6 reasons why Meta is in trouble.
User growth peaked
The heyday of Facebook's wild growth of users is over.
Earnings shows that although Meta announced a slight increase in the number of new users of its apps, including Facebook, Instagram, Messenger and WhatsApp.
But facebook, the most core social networking app, still had about 500,000 fewer users in the fourth quarter than the previous quarter.
In the past, Facebook's audience represented a much more diverse population, defined as a platform with the ability to attract more new users.
The decline marks that Facebook's user growth may have peaked.
This is the first time in 18 years that the company has seen this downward trend. Its quarterly user growth rate is also at least the lowest in three years.
Meta executives pointed to other opportunities to boost user growth, such as shifting to other applications. For example, Instagram and instant messaging service WhatsApp will generate considerable revenue in terms of user growth.
Apple's privacy tweaks hit Meta hard
Last spring, Apple updated its iOS system with App Tracking Transparency.
This latest privacy tool essentially gives iPhone users the option of whether or not to let apps like Facebook monitor their online activities.
It now appears that this privacy measure has indeed had an impact on Meta's revenue and is likely to continue.
For now, Apple's privacy changes to the iOS operating system last year have reduced the social media company's sales by about $10 billion this year.
Because Facebook and other apps must explicitly ask users for permission to track their behavior, many users choose not to track.
This means that Facebook's user data will be reduced, which makes ad targeting more difficult.
For Facebook's advertisers, iPhone users are a more lucrative market than Android app users.
Meta's chief financial officer, Dave Wehner, said on a conference call with analysts following the release of the company's fourth-quarter 2021 earnings report.
"We believe the overall impact of iOS on our business in 2022 is negative. Sales fell by about $10 billion, which is going to be a considerable headwind for our business."
Google get a piece of the pie
In addition to Apple's privacy policy, Meta's advertising business has a strong competitor.
On Wednesday, David Wehner, Meta's chief financial officer, noted that because Apple's privacy policy has made advertisers less aware of user behavior, many advertisers have begun to shift their advertising budgets to other platforms, such as Google.
On Google's earnings call, the company posted record sales, especially when it comes to e-commerce search ads.
Unlike Meta, Google doesn't rely heavily on Apple when it comes to user data.
Wehner said google is likely to have more third-party data for measurement and optimization purposes than Meta's advertising platform.
On Apple devices, Google is the default search engine in Apple's Safari browser. This means that Google's search ads will appear in more places, absorbing more data useful to advertisers.
This is a huge problem for Meta in the long run, especially if more advertisers turn to Google for search ads.
Rival TikTok
For more than a year, Zuckerberg has emphasized that TikTok is a formidable opponent.
ByteDance's overseas short video app TikTok has grown into a short video giant with more than 1 billion users, thanks to its highly shared and massive amount of fascinating short videos.
For now, TikTok has become Instagram's biggest competitor.
In August 2020, Facebook officially launched Instagram Reels, which benchmarks TikTok, to more than 50 countries around the world.
Zuckerberg said Wednesday that Instagram is currently the number one driver of the new app, with Reels taking a prominent place in many people's Instagram subscriptions.
The problem is that while Reels may appeal to a lot of users, it doesn't deliver as much revenue as Instagram's other features.
This is because making money from video ads is slower, and people generally skip these ads.
This means that the more Instagram encourages Reels, the more Reels users there are, and the less money you can make from those users.
Metaverses are frantically engaged
Zuckerberg firmly believes that the next generation of the Internet is the metacosm.
While this is a still vague theoretical concept involving people acting in different virtual and augmented real worlds, Xiao Za is willing to pay a lot of money for it.
Meta spent more than $10 billion on metasystem construction last year. Zuckerberg said, "I hope to spend more money in the future."
However, there is no evidence that investment in the metacosm will pay off.
This is not the same as Facebook's transformation of its flagship products to mobile devices in 2012, and the application of virtual reality is still a niche amateur and has not yet formed the mainstream.
The popularity of AR headsets will take months or even years.
Essentially, Zuckerberg is convincing employees, users, and investors of his views on him and his vision of the metaverse.
But for a vision that will cost the company billions of dollars in the coming years and may never be realized, it is no small challenge to get others to fully trust him.
Recently, Phil Libin, former CEO of Evernote and now CEO of video conferencing company Mmhmm, said that Meta's view of the metaverse is an "old idea" that lacks creativity and has never worked.
After experiencing Horizon Workrooms, Libin believes that Meta's virtual reality technology in video conferencing is less enticing than Zoom.
In Zoom meetings, people can still do real-world things like drink a cup of coffee. If I wear a giant plastic headset on my face during a meeting, how can I not spill hot coffee all over the place?
Antitrust Shadows
The threat posed by regulators in Washington to Zuckerberg is a big headache and will never go away.
Meta faces multiple investigations, including the recent aggressive Federal Trade Commission and attorney generals in multiple states, investigating whether it has taken anti-competitive action. Lawmakers also agreed around Congress's efforts to pass an antitrust bill.
Zuckerberg believes that Meta does not monopolize social networks. He pointed to an "unprecedented level of competition" from Tiktok, Apple, Google and other future rivals.
However, the threat of antitrust action makes meta more difficult to integrate into new social networking trends. In the past, Facebook bought Instagram and WhatsApp with little censorship, even though the apps already had billions of users.
Now, even Meta's seemingly less controversial acquisitions of vr and Giphy are being closely watched by regulators around the world.
As deals such as acquisitions become less and less likely, the responsibility for innovation falls on Meta itself. In the past, people may have believed zuckerberg's ability to do this. But at least last Thursday, Wall Street lacked confidence in it.
Resources:
https://www.nytimes.com/2022/02/03/technology/facebook-meta-challenges.html?smid=tw-share
https://www.entrepreneurnews.co.uk/social-media/facebook-loses-a-million-daily-active-users-posts-big-revenue-result-for-full-year-2021/
https://www.prnewswire.com/news-releases/meta-reports-fourth-quarter-and-full-year-2021-results-301474305.html
https://s21.q4cdn.com/399680738/files/doc_financials/2021/q4/FB-12.31.2021-Exhibit-99.1-Final.pdf
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