Prepared by: Khansa Al Zubair
Meta (formerly Facebook) has lost about two-thirds of its market value since stocks peaked in September 2021, and the stock is currently trading at its lowest level since January 2019, ending the third consecutive quarter of losses. And the stock is among the four worst performers on the Standard & Poor’s Index.
A year ago, before the name change, the company had a market capitalization of around $1 trillion, which put it in a high position with a handful of tech giants in the United States; Its work was based on the effects of social networks, where each user brought his friends and family members, and each of them in turn invited his colleagues and friends until large numbers gathered in one place and in a short time; Advertisers found in this social platform fertile ground to plant their ads, which was a source of abundant profits for the company, and also provided the capital needed to hire the best and brightest engineers to keep the business going.
All of this reversed in 2022 as users jump off the platform ship and advertisers cut back on advertising spending, with Meta on track to report its second consecutive quarterly revenue decline as companies remove the Facebook button from their websites after it was in The former is a common social network login button.
And it became clear that the recruitment process in the company was affected, especially since the founder and CEO, Mark Zuckerberg, spends most of his time inviting the metaverses, which may be the company’s future, although it does not represent any source of its revenue in the near term, and building this technology costs billions of dollars a year. Which Zuckerberg said he hopes will reach a billion people over the next decade and host hundreds of billions of dollars of digital commerce but investors aren’t excited about it, and the way they’re dumping stocks makes some observers wonder if this downward pressure is actually a downward spiral A death that Meta cannot recover from.
Strength despite weakness
Yet no one thinks that Facebook is in danger of going out of business as the company still occupies a dominant position in mobile advertising. No, it also has one of the most profitable business models on the planet; It generated a profit of $6.7 billion despite a 36% drop in net income in the fourth quarter of the previous year, and ended the period with more than $40 billion in cash and marketable securities.
Facebook’s problem with “Wall Street” is that it no longer tells the usual growth story, and the slowest year for its revenue growth was the pandemic year 2020, as it continued to expand by 22%, and analysts expect this year a decline in revenue.
The number of daily active users in the United States and Canada has also fallen in the past two years from 198 million in the middle of 2020 to 197 million in the second quarter of this year; Globally, the number is about 10% more than this, and according to Facttest estimates, it is expected to increase by 3% annually until 2024.
Sales growth is expected to hover in single digits for the first half of 2023 before rebounding, but even this bet carries risks because new generations are now turning to the TikTok platform where users can create and watch short viral videos instead of Having to go through political posts they don’t like or people they have mistakenly associated with on Facebook.
Rivals and fears
Now Meta is trying hard to imitate the success of Tik Tok by introducing the short video called “Rails,” which has been a major focus across Facebook and Instagram, and the company plans to increase by 15-30% in the amount of algorithmically recommended short videos in the “Instagram Feeds.” » For users, experts predict that the company will likely get a massive revenue stream from this algorithmic shift; However, Facebook acknowledges that it is still too early to monetize Rails and it is not yet clear how suitable it is for advertisers; While Tik Tok’s business remains opaque because the company is owned and managed by a private sector, the Chinese ByteDance.
Sheryl Sandberg, who served as Facebook’s chief operating officer, had previously stated that videos are more difficult than images in terms of ads and measurement and that Facebook should show companies how to use Rails’ advertising tools; Cheryl said she thinks it’s very promising but before that there is some hard work. Some skeptics believe that Zuckerberg should know in order to go into this business.
Zuckerberg has at least one major cause for concern, other than stagnating user growth and a slowing economy, which is Apple. An iOS privacy update in 2021, called App Tracking Transparency, hampered Facebook’s ability to target users with ads, costing the company an estimated $10 billion in revenue this year as Meta relies on AI-powered ads to compensate. In the end about the changes Apple is making, but experts in the field of internet marketing say they have seen the rise and fall of social networks as trends change and users move accordingly, and they believe that this problem is not solvable with artificial intelligence.
The last time Facebook’s market value fell this far was in early 2019 when the company faced the ongoing fallout from the Cambridge Analytica privacy scandal, and since then the platform has suffered further damage to its reputation, especially from documents leaked last year by Whistleblower and ex-employee Frances Haugen, a key finding from this employee’s saga, which preceded the name change to “Meta,” was that Facebook knew of the many harms its products had caused to children and was unwilling or unable to do anything about it. Some US senators have compared this platform to the major tobacco manufacturers.
Despite this, experts believe that improving the brand’s reputation, although it is difficult, is not impossible, similar to what happened in “Domino’s Pizza” that famous story, and how the company was able to restore the position of its shares.
Some believe that the damage to the reputation of “Meta” could also harm its ability to recruit first-class talents, and that “Tik Tok” has a greater advantage in terms of employment.
Conversely, some argue that Zuckerberg has a history of proving his skeptics wrong, as when investors quit Facebook shortly after its 2012 initial public offering, mocking the company’s ability to move from the PC to the mobile world. Facebook on these devices.
Regardless of what happens in the next year, two or even three years, Zuckerberg made it clear that the company’s future lies in the metaphysical region as it deals with new businesses that are taking shape around virtual reality.
And if Zuckerberg is right, then maybe 10 years later, META’s stock will rise, and predictions of a “death spiral” like the 2012 cover of Barron magazine, titled “Facebook is $15” with a thumbs down, will be mocked; Four years later, it was trading near $130.