$252 billion wiped out overnight!Meta Escape, Immortality or Ashes?

2022-05-11 0 By

In this roller-coaster earnings season, every time the tech giants report results, there are plenty of people who want to be saved.On Wednesday, Meta reported quarterly results that showed the company’s global growth stagnating for the first time, and the company’s focus on the metasverse project was even more glaring.Reality Labs, the company’s “metasverse” unit, reported huge and growing losses over the past year, losing $10.2 billion on revenue of less than $2.3 billion and $3.3 billion in the fourth quarter alone, according to its earnings report.In 2019 and 2020, Reality Labs reported revenues of $500 million and $1.14 billion, with losses of $4.5 billion and $6.6 billion, respectively.Meta expects operating losses to “significantly increase” in 2022.Prior to this, Meta had already issued a warning that the current quarter could be the slowest growth period on record.Wall Street reacted in a dignified panic, like a signal flare, and the market suddenly sold off. Meta shares plunged 26.39% after hours on Thursday, wiping out $252 billion in market value, the biggest one-day drop since going public, and destroying the shares of social media companies.Its shares are down 37.33 per cent from their September peak.Zuckerberg’s personal fortune also shrank to $92 billion, down from $121 billion before the results were announced.On the same day, Snap shares fell 23.6%, Spotify missed expectations, falling 16.76%, Pinteres fell 10.32% and Twitter fell 5.56%.The plunge in social media also triggered a broader decline in tech stocks.Over the past few months, U.S. investors have been dumping technology stocks and other high-growth companies on fears of higher interest rates.The Nasdaq is now down 13.57 per cent from its record high last November.Recently, the positive results of other big tech companies led to a recovery momentum, but the Meta single-handedly stopped, ending the four-game winning streak.Why is it so sad?Zuckerberg’s eyes looked red and he rarely wore glasses, according to an anonymous participant in the earnings call.The audience was told he might shed tears because he had scratched his eye.At the meeting, Zuckerberg repeatedly mentioned the strength of his opponent.”People now have so many options for how to spend their time, and apps like TikTok are growing so fast, which is why our efforts on Reels are important in the long term.”TikTok is undoubtedly a formidable competitor for Facebook, and can continue to grow rapidly from its huge user base.New gameplay and negative news like privacy scandals have led to a flood of young users turning to competing platforms like TikTok.According to research firm Forrester, TikTok will now be used more weekly by 12- to 17-year-olds in the US than Instagram in 2021.Last year, Zuckerberg announced that he would make the short video app Reels a more central part of Facebook’s product experience for younger users, in an attempt to replicate TikTok’s success.The shift, of course, is to a less profitable business model.In short video platforms.Revenue from ads placed in videos is significantly lower than Facebook’s original model.But in a situation where living space is being squeezed, it can be a way to put out a fire.In fact, Facebook’s user growth has been stagnant in the US and Europe for the past few years, but this decline has been offset by continued user growth in emerging markets.However, most of the 500,000 users Facebook lost in the fourth quarter of 2021 were in emerging markets like India, Latin America and Africa, which points to a common refrain — that its products have reached global saturation and that the platform is now experiencing net negative growth in daily active users.Meanwhile, tens of thousands of pages of internal Facebook documents released by whistleblower Francis Hogan show that the platform’s algorithms have increased the exposure of fake news, increased social division in the US, and allowed violent groups to exploit the platform, among other things.As a result, Meta is facing antitrust lawsuits in the United States and Even Europe that have a significant impact on its business.These irreversible political pressures caused even the cryptocurrency project to be abandoned.All of this is why Zuckerberg is betting on new frontiers such as the metasexes.As Rich Greenfield, a partner at consulting firm LightShed, puts it, “Meta’s profit was a shock. No one could have predicted that Meta was on the verge of death.””Meta is being forced to build something without transparency (the meta-universe) until it comes to fruition decades later.”Mr Zuckerberg warned last quarter that the Metaverse investment was “not going to be profitable for us in the near term”.The company has made significant efforts to transform itself into a hardware giant, including changing its name to Meta and hiring 10,000 new employees, but the transformation is still in its early days.It may take 5-10 years or even longer to build a meta-cosmic scenario.Perhaps only giants like Meta have enough time to find new strategies and sources of growth.From this perspective, Meta’s huge investment in the metasexes is also an advantage, as companies with strong balance sheets have a steady flow of capital compared to smaller companies.When, and if, Zuckerberg’s metasomes will materialize remains a difficult question.As he said on the earnings video call, “Last year was about laying the foundation for our efforts to move forward, and this year is about really executing that effort.”Will there be surprises in the New Year?02 is controlled by Meta, which started out as social software. It has been 18 years, spanning two eras of PC Internet and mobile Internet.But for a long time, whether in the operating system, or in the terminal hardware, it is the identity of the “host”.This positioning, while delivering huge savings in r&d costs, also relies heavily on companies that provide systems services and hardware products.For example, in addition to the cost of building a meta-universe, changes in privacy policies on platforms like Apple and Google have made it more difficult for software like Facebook to track users and target ads, impacting Meta’s revenue.Meta is expected to lose about $10 billion in sales in 2022 due to privacy policies alone.In particular, the iOS privacy policy was a devastating blow to Meta’s business model.For the vast majority of Meta and Snap advertisers, they are now paying the same amount of money for far less than they used to.At this point, they have only two choices: the first is to spend more money to achieve the original advertising effect;The second is a shift to other types of advertising platforms, such as Amazon, an e-commerce company with huge amounts of consumer shopping data, and Google, a search advertising platform.Facebook advertising unit price vs. Exposure year-over-year (%), source: Citic SecuritiesFacebook’s algorithm, in fact, analyzes the data it collects from users and then pushes ads and content accordingly, saving users the step of actively searching.On Amazon and Google, users must first express their needs, whether through categories or search, in order to find the goods and content they want.Therefore, the same advertising content, under the environment of iOS privacy New Policy and strengthened data supervision, based on recommendation core based search advertising model, the former will undoubtedly be greatly affected.But with the world’s second-largest operating system after Android, Meta has no bargaining power at all.Macroeconomic factors, such as supply chain disruptions and inflation, have also hit advertisers’ budgets.In terms of hardware, although Meta has taken the lead in the next generation of smart terminals, VR headset shipments are far ahead in the world, with Quest 2 shipping more than 10 million units.But those devices still run VRO, an Android operating system that takes a lot of time to update every time Google updates Android.This makes it difficult for Meta to form its own ecological closed loop.Since 2017, Meta has been working on its own operating system with the intention of becoming independent from Apple and Google.It’s a story that has played out countless times over the years, as companies including Microsoft have tried and failed to break the operating system monopoly.Here I have to sigh that Apple and Google are first-class companies because they have the most core barriers.Google is truly a technology-driven company, finding ways to change the world from technological change;Apple is pursuing perfection in the barriers and user experience formed by hardware for a long time.There is no turning back from either.Meta may be a geek, but he’s not cutting edge in technology.If you want to apply traction technology, the difficulty itself is more difficult.But in today’s era of increasingly iterative technology, it’s a matter of time to catch a ride on the ark of the new age.If the meta-universe that Meta is betting on really makes a big breakthrough, will it be able to replicate Apple’s global success in the mobile Internet era?For example, Tencent’s reduction of its holdings in JINGdong is not ambiguous at all.But Americans probably don’t believe that.In the global anti-monopoly wave, Meta, already in trouble, not only has to face the increasing pressure from competitors, but also has to take a concept and make a desperate attempt to complete the lofty but difficult transformation of the meta-universe.Building a meta-universe is an expensive gamble.However, this is a matter of corporate strategy. It is not easy to evaluate whether it is right or wrong. Only time will tell.Just as a decade ago, Buffett praised Facebook in an interview as an “extraordinary business,” but he couldn’t be sure how it would perform five or 10 years from now, so he wouldn’t invest.”It’s much easier for me to figure out what Coca-Cola is worth than Google or Facebook.I’m not saying they won’t have a great future, I just can’t judge.”You could say he’s stuck in his ways and missed The Times, but give him the credit for being a steady old dog.