Facebook share prices collapsed 20% on Thursday wiping about $200 billion from the social media giant’s market value. Meta, Facebooks parent company said its user growth faltered in the latest quarter, the first stagnation in the social network’s history
Meta Inc. also provided a disappointing sales forecast for the current quarter, and CEO Mark Zuckerberg acknowledged that Facebook is facing serious competition for user attention and time, including viral video-sharing app TikTok.
According to Forbes.com the gloomy outlook and stalled user growth are a dramatic change for a company that has experienced gains in all but one of the years since its 2012 IPO. Fueling fears that Meta Platforms’ flagship product and its core advertising business have finally plateaued after years of consistent gains.
Zuckerberg says Facebook’s rival to TikTok’s, Reels, is growing, but its monetization has been slow to materialize. He asks investors to be patient as Meta ramps up the product.
In a conference call on Wednesday, he said there is a great deal of potential for growing engagement with Reels over time.
We have decided to push forward and grow Reels as fast as possible and not hold back at all. Even if it means some slower growth in the near-term than we would have liked.
Facebook (Meta) is fighting regulatory battles
These results come at a critical time for Facebook. Meta is fighting regulatory battles on several fronts and also trying to justify a costly bet on the metaverse. Zuckerberg’s vision of an immersive internet could take years to become a reality.
Over the last decade, it has seemed like Facebook would never stop growing. Instead, young users prefer platforms like TikTok and YouTube, which serve as entertainment and communities instead.
Meta has rarely experienced so many severe threats at once. Meta is also contending with a crackdown on targeted advertising by Apple Inc, which said it may cut $10 billion in revenue this year, and budget cuts by advertisers because of rising costs and supply chain disruptions.
The company, which changed its name last year to Meta to signal its future direction, is also planning to change its ticker to META in the first half of the year. After closing at $323 in New York, shares fell to $244 late in late trading. As of Wednesday’s close, the stock, which trades under the ticker FB, had declined 4% so far this year.
Reality Labs, a division of Meta that includes the company’s investments in the virtual world and metaverse, reported an operating loss of $3.3 billion for the fourth quarter.
In the fourth quarter, Facebook reported 2.91 billion monthly users, flat from the previous quarter. The daily active users of the main app in North America — the company’s most lucrative market — have decreased slightly from 196 million to 195 million.
Reel App losing money
Meta is also taking a hit since it doesn’t make as much money from Reels video clips as it does from other products, like News Feed and Stories. Even so, executives said Reels would one day make as much money like those other products.
According to Meta, the company reported net income in the fourth quarter of $10.3 billion, or $3.67 per share, missing analysts estimates of $3.84 per share. Compared to a $33.43 billion average estimate, revenue was $33.67 billion.
The company reported earnings for the first time since changing its name from Facebook late last year.
In addition, it was the company’s first financial report since Zuckerberg said the company’s new “North Star” would be attracting young people.
Meta does not categorize users according to their age. It does not reveal how many users use Instagram or messaging service WhatsApp, or how much revenue these properties generate.
About 97% of the company’s revenue comes from advertising on its social platforms. A recent change to Apple’s iOS software for iPhones means that companies like Meta must seek explicit permission to gather user data. According to early estimates, most users reject this tracking, which makes targeted advertising – Facebook’s main selling point – more challenging.
Chief Financial Officer David Wehner said on the conference call that the overall impact of iOS will be on the order of $10 billion on Facebook in 2022.
By Geoff Thomas
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