Meta lost more than a quarter of its value in a single day

Facebook’s parent company Meta has had a very, very bad 24 hours. In a single day of trading, it saw nearly $240 billion, or just over a quarter of its total market value, disappear in a flurry of investor panic.

The company’s troubles began the afternoon before, when it reported fourth-quarter results that missed the $3.84 per share mark investors had set for its earnings of $0.17, despite ending the fourth quarter with revenues above expectations.

This negative indicator was further compounded by the fact that Meta reported its first-ever drop in the number of daily active users. The drop was relatively small, from 1.93 billion in Q3 to 1.929 billion in Q4, but it was enough to signify that the seemingly perpetual upward trajectory of Facebook users was no longer a certainty.

Results like these would have been problematic in any quarter, but they couldn’t have come at a worse time for the future king of the metaverse. This is the first fiscal quarter since the company decided to rebrand itself as Meta and focus, for the first time, on something other than social media.

The newly created Reality Labs (RL) division (which handles all augmented and virtual reality-related activities and sits at the heart of Meta’s planned virtual universe) produced just $877 million in revenue and a loss operating income of $3.3 billion. Meanwhile, the social media-focused Family of Apps (FoA) division (which includes Facebook, Instagram, Messenger, WhatsApp and other services), generated $32.794 billion in revenue for the quarter and reported a profit. operating income of $15.89 billion.

Of course, no one expected Meta’s foray into the VR/AR arena to immediately produce massive profits. But it’s worth noting that this increasingly questionable decision to dive so deep into the still-nascent metaverse comes at a crucial time; Facebook’s own CFO, David Wehner, mentioned in his fourth-quarter financial statement that the company faces “increased competition for people’s time.”

It looks like a good chunk of that time could well be taken up by Meta’s more social media-focused competition. Pinterest and Snap have both stayed the course in the social media market, and both companies just posted some of their best quarters ever: Pinterest rose 24% to beat expectations, while Snap climbed even higher. higher at 54%.

Of course, abandoning its bread-and-butter money generator and heading to the metaverse is far from Facebook’s only concern. It also faces opposition over its traditional user data collection revenue stream. This is thanks to Apple’s decision to introduce its App Tracking Transparency (ATT) feature.

The iOS maker’s policy change, which requires users to sign up for the kind of behavior tracking that Facebook relies heavily on, has seriously reduced Meta’s ability to collect data from iPhones and devices. ‘iPads. Meta estimated that the data reduction caused by Apple’s decision will cost it $10 billion during 2022.

To be fair, Snap also complained about Apple’s iOS changes. But, Snap hasn’t just been called before the Australian Parliament for giving its non-US users less protection from harmful content than their domestic counterparts as a cost-saving measure. This information was leaked by the same whistleblower who has been plaguing Meta for months now.

February 3, 2022 is by no means Facebook’s first bad day. The question now is what lasting impact the convergence of disappointing financial performance, dubious timing diversifications and cumulative public relations disasters will have on the company. We should start getting a glimpse of what the future holds as early as the opening bell on February 4th. But, the full fallout that will result from a day like this may not be known for very long.

About Darnell Yu

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