As the sixth largest company in the world with a market value of more than US $1 trillion, Meta's market value has evaporated by US $513 billion compared with the peak value set in September last year. On February 4, Meta closed down 26%, the largest decline in market value in the history of the US stock market. Two weeks ago, Meta released its sluggish financial report data, saying that its user growth had stagnated, leading to a continuous decline in its share price. So far, Meta's share price has fallen 46% from last year's record high.
Meta is in trouble for the following four reasons:
1. Weak user growth
The period of crazy growth of Facebook users has ended. Although Meta announced a slight increase in new users of its application family (including Instagram, Messenger, and WhatsApp) on Wednesday, the number of users of its core Facebook social network application in the fourth quarter decreased by about 500,000 compared with the previous quarter. This is the first such decline in Facebook's 18-year history. Since the company was founded, Meta's main selling point is its ability to attract more new users. The decline in the number of users means that the core application may have reached its peak. The user growth rate of Meta in the fourth quarter was also the slowest in at least three years. Meta lost its ability to attract young users and became "senile".
2. Apple's privacy adjustment hit Meta advertising business hard
Meta, as a company that appears to be social and advertises, Apple launched the "Application Tracking Transparency" update in iOS last year, which allows iPhone users to choose whether to let Facebook and other applications monitor their online activities. These privacy protection measures have now greatly damaged Meta's business.
Apple will pay attention to the privacy and security of users is fundamental to the company. Facebook is often exposed to secretly collect personal data. For this reason, the two companies also formed a grudge and attacked each other constantly. After this update, Facebook and other applications must explicitly ask for people's consent to track their behavior, and many users chose to refuse. This means that Facebook's user data will decrease, making targeted advertising, one of the company's main ways of making money, more difficult.
For advertisers, users of the IOS system often have more business value than users of the android system. On Wednesday, Meta said that Apple's privacy adjustment will cost it $10 billion in revenue in the next year. Meta blamed Apple's adjustment, saying it was bad for small businesses that rely on social network advertising to reach customers. However, Apple is unlikely to change its privacy policy, as Meta's shareholders know.
3. Meta universe has invested heavily and has not yet made profits
Zuckerberg firmly believes that the next generation of the Internet is the meta-universe, and he is willing to invest heavily in it and rename the company, Meta. At present, the meta-universe is still a vague theoretical concept, involving people moving in different virtual reality and augmented reality (VR/AR) worlds. The investment in the universe was so large that Meta spent more than $10 billion last year. Zuckerberg expects more investment in the future.
However, there is no evidence that such bets will pay off. Unlike Facebook's move to mobile devices in 2012, although the sales of Oculus Quest 2, a VR headset display of meta, exceeded the total sales of all previous products in the past 21 years, the use of virtual reality is still the domain of small fans and has not entered the mainstream. Users and investors want to believe his vision of the meta-universe. It may have some effect in the short term. After people think it over calmly, Meta may burn tens of billions of dollars for the meta-universe, but it will not bear fruit.
4. Young people kill old masters in TikTok without saying martial virtues
TikTok already has more than 1 billion users. Zuckerberg has been emphasizing how terrible TikTok is in the past year. Thanks to the accuracy and high sharability of TikTok short video algorithm, it is very addictive. To counter this, Meta copied TikTok and launched a video product called Instagram Reels. Zuckerberg said on Wednesday that Reels is currently the number one driver of user participation in the entire Instagram application. Reels are prominent in Instagram information flow.
The following problem is that although Reels may attract users, it is not as efficient as other Instagram features, such as Stories and main information flow. This is because the speed of making money through video ads is slow. After all, people tend to skip them. This means that the more Instagram promotes people to use Reels, the less money it will make from these users.
In addition, the threat of Washington regulators to Meta's antitrust actions is a lingering problem. U.S. lawmakers are also trying to pass an anti-monopoly law. In the past, Facebook acquired Instagram and WhatsApp without being censored and gained billions of users with these services. Now, even some seemingly less controversial acquisitions of Meta in virtual reality and GIF are challenged by global regulators.
Not surprisingly, Meta's biggest slump in US stock history may not be the end, but the beginning. To some extent, the biggest slump in US stock history may mean that the biggest crisis moment in Meta's history is coming.