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Friday, Aug 12, 2022

Is Zuckerberg's Meta in trouble?

Is Zuckerberg's Meta in trouble?

The company has hit major problems amid its biggest market value wipeout ever

Social media giant Meta has delivered a gloomy outlook in its first earnings since undergoing a major rebrand in late 2021. The company suffered a staggering sell-off last week as its stock plummeted 26% and its market value plunged by more than $230 billion. Experts say Meta is in a difficult spot and more trouble lies ahead.

1. What is Meta?


Formerly known as Facebook, Mark Zuckerberg’s Meta Platforms brings together apps and technologies, including Facebook, Instagram, and WhatsApp, among other subsidiaries, under one new company brand. Zuckerberg announced the renaming in October, saying the company was transitioning from social networking toward the so-called virtual world of the metaverse.

2. What’s Meta’s biggest problem right now?


Even though Meta recorded modest gains in new users across all of its apps, growth hit a ceiling for its core Facebook social networking app, which has lost about half a million users over the last three months of 2021, compared to the previous quarter. That’s the first such decline for the company in its 18-year history.

3. How are Apple changes affecting Meta?


The iPhone maker recently announced it is considering pulling out of Europe if it’s not given the option to transfer, store, and process data from its European users on US-based servers. The problem is related to the so-called App Tracking Transparency update introduced by Apple last spring to its mobile operating system. The update allows iPhone owners to choose whether they would let apps like Facebook monitor their online activities. Apple’s changes would cost Meta $10 billion in revenue over the next year, Meta said.

4. Why is Meta losing advertising to Google?


Sharing data between countries and regions is crucial for the provision of Meta’s services and targeted advertising. Apple’s changes have given advertisers less visibility into users’ behaviors, so many have started shifting their ad budgets to other platforms, primarily Google. Unlike Meta, Google is not heavily dependent on Apple for user data. The company reported record sales, particularly in its e-commerce search advertising. Meta called out Google’s advantage during a disappointing earnings report, claiming “Google’s search ads business could have benefited relative to services like ours that face a different set of restrictions from Apple.”

5. Who are Meta’s other major competitors?


The network is facing stiff competition from rival platforms like TikTok and YouTube Shorts. In response, Meta has shifted focus toward short-form video like Reels, to rope in young adults. Zuckerberg said having to compete for users’ attention with other social media apps – primarily, TikTok – is an obstacle that could inhibit Facebook’s growth in the future.

6. Why is Zuckerberg’s virtual reality world facing backlash?


Mark Zuckerberg’s push into Metaverse, a virtual world accessible through goggles or glasses, has led to an avalanche of criticism. Experts say the concept has the same old issues, like privacy. One of Facebook's earliest investors, Roger McNamee, has even labeled the social media giant's plans for a metaverse as “dystopian,” saying there’s much misinformation on the platform. Zuckerberg said last year that Meta would need to invest many billions of dollars for years to come before the metaverse reaches scale. The company has already invested more than $10 billion in 2021.

7. Why are governments cracking down on Meta?


In recent years, Meta has been involved in multiple controversies regarding privacy violations, and is facing antitrust investigations around the world. Mark Zuckerberg has argued that Meta is not a social networking monopoly. He has pointed furiously to what he calls “unprecedented levels of competition,” including from TikTok, Apple, Google, and other future opponents. Regulators have been addressing the Big Tech's anticompetitive conduct, and there are signs that US antitrust regulations may be about to toughen.

8. Is Meta in trouble?


The size of the Facebook parent’s collapse illustrates just how tech companies have ballooned in size to become behemoths with unprecedented market power, analysts say, pointing to the drama that can ensue when they fall. They point to the volatility that has gripped the technology sector this year, noting that the mood on Wall Street has turned decidedly bleak on the long-time market darling. According to some analysts, Meta found itself in “the middle of a perfect storm.” Others say that “the cuts run deep,” adding this could be “the beginning of the end.”

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