Mark Zuckerberg, then a Harvard undergraduate, launched Facebook in 2004 from his dorm room. Today, the site has grown to become one of the world’s most valuable and well-known companies, with an estimated value of over $100 billion. The Social Network, a film about the site’s origins, was released to critical acclaim in 2011. On October 28, 2021, in Menlo Park, California, Facebook will unveil its new corporate brand, Meta.
Facebook is a social networking service that connects users, whether they’re already friends or not. It lets users share media (photos, music, videos, articles) and ideas with as many or as few people as they want.
Faced with multiple challenges, Zuckerberg has renamed Facebook “Meta” and staked the future of the company on building a metaverse. (For brevity’s sake, we’ll keep calling Zuck’s company Facebook). According to Zuckerberg, the Metaverse will continue to lose money and cost $10 billion this year. Facebook has plenty of room to absorb setbacks with last year’s $29.1 billion profit on $86 billion in sales.
Metaverse idea
Imagine a future when billions of people live, work, shop, study, and socialize in a virtual world. Flat screens are portals to a 3D virtual world as accurate as our own, if not more so. Our digital selves, or avatars, may move between virtual worlds, carrying personal data and virtual cash.
Figure 2: Photo by Mediamodifier on Unsplash
The term “Metaverse” entered common parlance after Facebook changed its name to Meta and pledged $10 billion to the idea in October 2021. Technology behemoths like Google, Microsoft, Nvidia, and Qualcomm are all pouring billions of dollars into the idea alongside Meta. The metaverse economy might be worth $5 trillion by 2030, according to McKinsey & Company. E-commerce is expected to be the main engine, with gaming, entertainment, education, and marketing expanding swiftly.
Today, organizations use the word to denote web-based services that enhance customer experience. There are many examples, from online games like Fortnite to burgeoning virtual workplaces like Microsoft’s Mesh or Meta’s Horizon Workrooms. As corporations battle for supremacy, the current Metaverse is evolving into a multiverse with numerous unique metaverses.
Facebook investment
Meta Platforms, Facebook’s parent company, is spending heavily on augmented and virtual reality, but thus far, it’s looking like a terrible idea. Shares of Meta dropped 24% on Thursday, hitting a new low nearly four years after the company reported earnings that were described as a “train wreck” by one Wall Street analyst. When Facebook CEO Mark Zuckerberg announced, with great fanfare, on October 28, 2021, that the company’s name would be changed to Meta Platforms to emphasize its focus on the “metaverse,” the company was in a very different place.
Figure 3: Photo by Timothy Hales Bennett on Unsplash
After reaching a market value of over $1 trillion in September 2021, Facebook continued its upward trajectory into the following autumn. Advertisers were flocking to Facebook and Instagram to reach billions of users, driving revenue and profits. While the tech sector has taken a hit this year, Meta’s stock has taken a much bigger hit than the rest of the industry, falling 67% from a year ago compared to the 31% fall in the tech-heavy Nasdaq. Meta’s precipitous decline equates to a staggering loss of about $700 billion in market value.
Meta’s market cap dropped to $268 billion on Thursday from over $1 trillion in September 2021. The stock price bounced back early Friday, increasing $1.72, or 1.8%, to $99.66. Troubles have arisen for the social media giant, prompting speculation about whether it will fare any better than other major corporations whose future-focused strategies ultimately failed. Short-term, the slowing economy and reduced advertising spending pose problems for Meta’s core Facebook business.
The current state of Metaverse
Advertisers were flocking to Facebook and Instagram to reach billions of users, driving revenue and profits. While the tech sector has taken a hit this year, Meta’s stock has taken a far worse hit than the rest of the industry, falling 67% from a year ago compared to the 31% fall in the tech-heavy Nasdaq. Meta’s precipitous decline equates to a staggering loss of roughly $700 billion in market value.
In contrast, Facebook’s large user base of 1.98 billion average daily users for September 2022 represented a 3% year-over-year gain. It’s not bad, but it’s nothing like Facebook’s exponential growth in its early years. That slower expansion follows. For the first time in its history, Facebook reported a drop in monthly active users in February 2022. The social media giant, Meta’s primary source of revenue, is under competition from other services like TikTok, which are attracting a younger demographic.
Takeaway
Meta’s lifeblood is Facebook, Instagram, and WhatsApp advertising revenue, with businesses eager to reach their billions of daily users. Recent ad sales fell 3.7%, raising investor concerns. The economic slowdown means advertisers are cutting spending; the company cited an “uncertain and volatile macroeconomic landscape.” The company is also dealing with Apple’s app privacy changes.
