In other words, the company's going to lose money for only the Lord knows how long to create a product that only the Lord knows if users will enjoy ( according to recent polling a large majority of Americans are not particularly interested in the metaverse). And the metaverse investment losses are going to get even steeper in 2022, when Meta expects 'total expense growth rates may significantly exceed our year-over-year revenue growth rates.' Revenue for that segment, from sales of the Oculus goggles and games, came in at less than $1 billion in the fourth quarter, and well below analyst projections for the year. The company blew through $10 billion making metaverse investments last year, from hiring new employees to buying new data centers. This quarter, Meta started sharing its numbers for its metaverse business, and the figures are a disaster. But unlike the last time he built a place online, this one is going to take billions of dollars just to build because of its scale and complexity. Zuckerberg is taking an 'if you build it they will come' approach to the metaverse. The problem with that is there's no 'there' there. The metaverse is not a thingĮven as its current business shows signs of existential weakness, Zuckerberg wants investors to focus on the future. In other words: Facebook's cash cow is aging. 'Facebook is seeing a significant slowdown in advertising growth while embarking on an expensive, uncertain, multi-year transition to the Metaverse,' JP Morgan analyst Doug Anmuth wrote to clients after he downgraded the outlook for its stock.Īnumth continued: 'We believe management's tone around iOS impact has deteriorated, and what was once described as 'manageable' now appears to be a $10 billion revenue headwind in 2022.' Now we're seeing this diminishment of 'cool' show up in the user numbers, even though Facebook still doesn't share precise data about user engagement - the most crucial aspect of its business - on any of its platforms. Zuckerberg admitted that Facebook faces an 'unprecedented level of competition' from TikTok, the video-sharing social network that's growing rapidly among Gen Z. The Facebook Papers, leaked last fall, showed us that the company knows it is losing its appeal to younger customers. The company's flagship Facebook platform also saw a decline in global daily active users for the first time ever in the fourth quarter of 2021, which will naturally take another bite out of the advertising business. Thiago Prudencio/SOPA Images/LightRocket via Getty Images Meta's core apps - Facebook, WhatsApp, and Instagram - are hitting a ceiling: global users dropped for the first time ever in the fourth quarter. The company estimated that the privacy changes could shave $10 billion off its advertising revenue in 2022. The company admitted as much in its annual filing, saying that Apple's decision to allow iPhone users to opt out of being tracked by advertisers has made Meta's advertisements less precise and useful for ad buyers. Meta's advertising product - which accounted for 97.4% of its 2021 revenue - simply isn't as good as it used to be. While this sell-off may seem extreme, it's completely rational when you look at the company's fundamentals. It hasn't gotten any prettier since: The stock is now down more than 30% over the past month and was worth $267 billion less then before earnings as of Wednesday's market close. All told, $240 billion was shaved off its market capitalization. February 3, the day after the company's earnings, Meta's stock dropped by over 26% and registered the largest single-day value wipeout in US history. If you want to know how large the collective anxiety is over Meta's future, look no further than its stock. If that doesn't change, Zuckerberg is leading his epic dorm-room project turned multinational corporation down the path to ruin.

Instead, it is focused on building another one no one is excited about.

To save itself, Meta should have focused on making its core business stronger and its existing platforms safer for this world. The world has changed since Zuck built 'The Facebook.' Antitrust and privacy regulators are watching Meta closely, and public opinion of the company is nothing short of abysmal. And with the economy shifting, investors are looking for companies that look strong now, not ones that promise uncertain profits in the future. Meta is planning to spend billions to build a new reality that does not (and may never) exist in any meaningful way. At the same time, Zuckerberg is trying to realize a distant metaverse dream for which he renamed the entire company. It's about Meta's core Facebook business flailing and Wall Street punishing the company for that weakness. This time the dilemma isn't about the company's reputation. It often indicates a user profile.įacebook has been 'in crisis' before, but this time is different. Account icon An icon in the shape of a person's head and shoulders.

Meta stock crash