Meta is prioritizing investment in the short-form video feature Reels (AFP)
San Francisco:
Facebook’s parent company Meta on Thursday tumbled more than $200 billion in stock value – about the size of New Zealand’s economy – after the results raised doubts about the social media giant’s future. society is in trouble. Some reasons why it happens:
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Facebook’s growth, which has been on a steady upward trend, faltered late last year, with the number of people using the social network daily dwindling. Meta executives have warned of increased competition, especially from video star TikTok as well as messaging services like Telegram and Slack.
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The company is prioritizing investing in its Reels short-form video feature as well as apps like WhatsApp and Instagram to stay in tune with users. That means big spending on services that are harder to monetize than social network Facebook with its digital advertising machine.
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The Meta CEO told analysts that Facebook’s ad targeting effectiveness was being undermined by a change Apple made to the software that runs the iPhone. In an iOS update, Apple required app publishers to get permission before collecting data, which is unfortunate that companies like Meta rely on it for ad targeting.
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When iPhone users choose not to share data for ad targeting within the Facebook app, marketing messages become less precisely targeted and therefore less profitable. “Overall, we believe the impact of iOS on our business by 2022 is $10 billion,” said Meta CFO David Wehner. “So it’s been a pretty big headwind for our business.”
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Advertising at Meta has also been impacted by the broader market, as businesses cut budgets in the face of supply problems, labor rotation and the pandemic. According to analyst Colin Sebastian of Baird Equity Research. “Our concerns about the short-term growth outlook for Meta were not only unrealized, but worse than we thought,” Sebastian said in a note to investors.
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Meta’s CEO, Mark Zuckerberg, describes the metaverse as the future of life on the Internet. In that spirit, the tech company changed its name to “Meta.” The creation of the metaverse’s immersive online world is expected to take years and cost billions of dollars.
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A “Reality Lab” unit at Meta for technology that mixes the real and virtual worlds reported a loss of $10 billion last year, according to an earnings announcement. Large stock market investors are known to not like to wait a long time for big profits, tending to trade stocks based on the potential for quick profits.
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As Meta wants to make a “transition” to better compete with the likes of TikTok, a hit with younger users, regulators in the US and elsewhere have vowed to limit their power its strength.
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A federal judge in January ruled that the U.S. regulators’ trust case against Facebook could be continued, saying the lawsuit is stronger and more detailed than version deprecated in 2021.
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The US Federal Trade Commission has accused Meta of illegally holding a monopoly by acquiring potential competitors it now owns such as Instagram and WhatsApp. The lawsuit, which could take years to go through the courts without resolution, calls for “recovery of assets,” including WhatsApp and Instagram, to restore competition.
