Meta: Are The Cracks Beginning To Show?
For the past decade, Facebook employees and tech journalists closely monitored Mark Zuckerberg’s Facebook profile at the start of January for signs of the CEO’s annual personal challenge. Zuckerberg’s goals have ranged from traditional new year’s resolutions like running, learning a new language, eating more vegetables to broader political efforts.
At the start of 2020 however, Zuckerberg took the long view, revealing a number of tech-related goals for the next decade.
- Generational Change
- A New Private Social Platform
- Decentralizing Opportunity
- New Forms of Governance
- The Next Computing Platform: Building the next computing platform on augmented and virtual reality.
Zuckerberg went onto say:
“While I expect phones to still be our primary devices through most of this decade, at some point in the 2020s, we will get breakthrough augmented reality glasses that will redefine our relationship with technology.
Augmented and virtual reality are about delivering a sense of presence — the feeling that you’re right there with another person or in another place. Instead of having devices that take us away from the people around us, the next platform will help us be more present with each other and will help the technology get out of the way. Even though some of the early devices seem clunky, I think these will be the most human and social technology platforms anyone has built yet.”
PLACE YOUR BETS
Facebook has been quietly acquiring small VR studios over the years, but Zuckerberg’s ambitious vision for VR is powering a shopping spree that likely won’t stop anytime soon. In fact, they are looking to invest a further $10 billion this year to build out their vision of the metaverse. Are they ahead of the game or are they chasing a lost cause in trying to reclaim their glory of the past?
ENTER THE META
On 28th October at Connect 2021 Mark Zuckerberg announced the pivot from Facebook to Meta.
Entrepreneur David Sacks summed it up perfectly in a tweet:
If we look towards the crypto market, Bitcoin topped out at $69,000 a week later and went on to suffer a 50% drawdown.
Similarly, Meta’s stock went on to suffer following the announcement and is currently -40% YTD.
The move for me came out of desperation. Desperation for something new, desperation to feel relevant and loved again. Facebook has suffered huge trust issues over the last decade which has forced rumours to circulate that the brand will get a refresh.
And after revealing their Q4 earnings earlier this year questions around it’s longevity in a space where newer platforms are sweeping in and taking market share are creeping in.
So what are Meta’s headwinds coming into 2022?
Interest Rates
Central banks around the world are looking to raise interest rates in an effort to tame inflation. Generally, when interest rates go up tech stock valuations get hurt the most as an increase in rates reduces the value of future cash flows.
User Growth
After what seemed to be never-ending growth for the last 17 years Meta’s total user base declined for the first time. In Q4 of 2021 Meta lost half a million global daily users. Now, this might seem quite premature and just a drop in the ocean for a company like Meta, but it represents a low point for a metrics-driven company whose user base long grew at a rapid pace across its different apps.
The rise of newer apps like TikTok is also hurting the amount of time people are spending on their platform which Zuckerberg nodded towards in their Q4 earnings call.
“People have a lot of choices for how they want to spend their time and apps like TikTok are growing very quickly.”
Losses in VR begin to mount
Over the course of Q4 2021 Facebook Reality Labs (their VR/AR department) mounted a loss of $3.3 billion, and they warned that the losses will continue to mount over the course of 2022 as they accelerate their push into the Metaverse. These continuous investments in talent and studio acquisitions seem steep for a business segment that only accounts for less than 3% of their top line don’t you think? Regardless, I’m sure Zuckerberg will chase this ambition relentlessly but the question is to what end?
Ecosystem
Meta is essentially an app that sits inside of an ecosystem that is subject to the rules of the platform owner (Apple and Google). Apple’s IDFA change will have a $10 billion dollar impact in 2022. On every iPhone and iPad, there is a unique device identifier called the IDFA. Facebook and others that sell mobile ads rely on this ID to help target ads to users and estimate how effective they are.
With an upcoming update to iOS 14, apps that want to use IDFA will have to ask users to opt into tracking when the app is first launched. If users opt-out, it will make these ads a lot less effective. In turn, hitting Facebook’s largest revenue stream.
Final thoughts
I could be wrong with all of this and Facebook completely owns the Metaverse one day! However, I think even investors are looking at Facebook now and thinking:
“Okay, so this is a company whose long term ambitions revolve around VR/AR, a segment which currently represents less than 3% of their top line. They’re willing to take losses of $10 billion in the short term to manifest that vision, is there a growth story in a company like that over the next 12 months?”
This pivot to me is a huge show of bravado. They’re trying to stick their flag in the ground and show competitors they mean business. If they can build something truly amazing they will regain that user base and go on to flourish in this new economy. However, in my opinion, platforms like Microsoft, Twitter, Apple and Google are in a better position to benefit from Web3 and this new economy.
Drop me your thoughts below on Web3, Meta and Crypto and I’ll be sure to respond ASAP!
Author:
Brand Marketer
