Shares of the company Meta dropped by 26.4% last Thursday. The company’s stock market value fell by around $230 billion and Chief Executive Mark Zuckerberg lost more than $30 billion of his net worth. This is the worst one-day crash in the history of the stock market.
The Reason for the Drop
The company’s plummeting shares came after Meta announced revenue figures that were lower than expected. This is the first time ever that the company has failed to grow.
It seems that Facebook’s plunging shares have also affected other social media platforms. Other social media stocks also suffered during pre-market trading on Thursday. Shares of Twitter, Pinterest and Spotify also dropped, with Twitter’s shares down almost 8%.
A Drop in Users
The number of Facebook users has also declined for the first time in the company’s history. Meta reported that the number of daily active Facebook users fell from 1.93 to 1.929 billion. A fall of 1 million users was more than enough to cause uncertainty among investors.
Meta also reported that roughly 3% of active users across the globe are actually violating accounts. Duplicate accounts constitute another 11% of users.
Zuckerberg appears to blame the drop in daily active users on big social media competitors such as TikTok. TikTok is already a huge competitor among social media platforms and one that is still on the rise.
A Forrester survey found that weekly usage of TikTok increased from 50% to 63% among 12 to 17-year-olds in America in 2021. Weekly usage of Instagram decreased from 61% to 57%. TikTok is only continuing to grow in popularity.
It appears that Meta is now modelling TikTok by the introduction of Reels to the Facebook site. Reels are the company’s own take on the short-form video feature that has made TikTok so popular. This seems to be an attempt by the company to appeal to and retain Facebook’s younger adult audience.
Meta Software Privacy
The company has also lost roughly $10 billion as a result of the changes to software privacy brought in by Apple last year. These changes had a significant impact on the company, as Met’s business model is based on targeted advertising.
However, Zuckerberg appears to be looking forwards to the creation of the “metaverse” which the company is striving towards. The metaverse is set out to be a digital universe, created by multiple different aspects of technology including virtual reality, in which people live.
Facebook and its other apps Instagram, WhatsApp and Messenger are now a separate division from the Facebook Reality Labs. The Reality Labs are responsible for the production of reality goggles, smart glasses and other high-tech products.
Meta reported that the Reality Labs division spent more than $10 billion in 2021 but produced only $2.3 billion in revenues. Quarterly profits decreased by 8% as a result of the Reality Labs’ spending.
Zuckerberg has warned that the metaverse is unlikely to bring in a profit any time soon. The expenses so far seem to be just the first step in the metaverse creation process.
There are some who have doubts about the success of these virtual realities, such as metaverse. Elon Musk, for example, does not seem to be convinced that the metaverse will be overly popular.
In an interview with site The Babylon Bee, he argued that the metaverse lacks the appeal of conventional social media and that he cannot see people willingly strapping themselves to a screen all day.
Meta and Digital Currency
Meta’s plans to create a new global digital currency were also dropped this week. The company announced the project, then called Libra, in 2019. The aim of the project was to create a universal ‘stablecoin’, backed by the US dollar, which could be sent and received through smartphones.
However, the project, which was renamed Diem in 2021, caused uncertainty among regulators and lawmakers. Many were worried about the power that the new cryptocurrency would give Meta. There were also concerns that Diem could potentially increase cybercrime and fraud.
At the start of 2022, Meta announced that it would be selling Diem’s assets to Silvergate Capital Corporation, a cryptocurrency bank.
Meta has been careful in the company’s predictions for this year. The company has warned that this year will be a tough in comparison with last year when online activity, including advertising, was boosted by the coronavirus pandemic.
The company has also faced a number of their own controversies. Concern over the spread of fake news reached new heights during the coronavirus pandemic.
Facebook was under pressure over misleading information and comments that remained on the site. Controversial comments made by Donald Trump in response to the George Floyd protests, for example, were removed by Twitter but left on the Facebook site in 2020.
Facebook has also come under fire once again for invading the privacy of its users. Accusations spiked in 2020, when WhatsApp received backlash for allegedly sharing user data with Facebook.
However, with the metaverse in the making, Zuckerberg seems to be confident that this year will still be one of achievements and accomplishments for the company.