Shares in the company formerly known as Facebook lost more than 20 percent of their value on Thursday morning, after the social media company posted quarterly results that showed its core business is slowing, even though spends billions of dollars trying to become an industry leader. metaverse
Meta reported Wednesday that it had revenue of $27 billion last quarter, down from $29 billion previously. It’s two consecutive quarters of declining revenue and the company expects the same to happen in the current one, which was enough to send investors out.
Meta shares were changing hands at just over $100 a share Thursday morning, a level not seen since 2016. As recently as February, they were worth more than $300 each, enough to make the company one of the few stocks in the world. with a valuation of $1 trillion.
The company was once an advertising giant, but financial results in recent months show emerging rivals like video-sharing website TikTok are monopolizing an increasing number of eyeballs that once belonged to Facebook or its other service, Instagram.
It was around this time a year ago that the company, then known as Facebook Inc., rebranded as Meta to reflect its belief that its future lies in the metaverse, a universe of virtual, mixed reality. and augmented that exists entirely online.
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Facebook rebrands and reveals plan to focus on the metaverse
In an effort to attract younger users and distance itself from the recent controversy, Facebook announced its new corporate name, Meta Platforms, and plans to create a virtual reality network known as the metaverse.
A year later, the company has spent billions of dollars on the metaverse experiment with very little substance to show for it.
The company’s metaverse-focused unit, called Reality Labs, had revenue of $285 million in the quarter. But it posted an operating loss of $3.87 billion. This number is expected to be even higher next year.
Investors worry that Meta is spending too much money and confusing people with its focus on the metaverse, a concept that users still don’t understand or seem to want, at a time when their other cash cows are starting to dry up- yes
Richard Lachman, associate professor at Metropolitan University of Toronto, says the company has pushed aggressively into things like expensive VR headsets because they need a “killer app” to propel people into their version of the metaverse.
“The uptake hasn’t been great,” he told CBC News in a recent interview. “A lot of people may have tried a game or entertainment, but it’s not generating massive sales.”
Brad Gerstner, the CEO of Meta shareholder Altimeter Capital, wrote an open letter to CEO Mark Zuckerberg earlier this week urging the company to forget about its metaverse experiment and refocus in its main business.
“Meta has drifted into the land of excess: too many people, too many ideas, too little urgency,” he wrote, urging the company to reduce staffing levels and cut costs. “This lack of focus and fitness is obscured when growth is easy, but deadly when growth slows and technology changes.”
“An Absolute Trainwreck”
Facebook isn’t the only tech giant to see its stock tumble in recent months, but the depth of its decline has been far greater than other companies have seen.
Google shares have lost 35 percent in the past year, while Microsoft is down 29 percent. Over that same period, Meta’s stock has lost more than 65 percent of its value.
Daniel Ives, a technology analyst at Wedbush Securities, which covers all the big tech names, called the company’s financial results “an absolute disaster.”
“The company is facing privacy issues, massive digital media headwinds, social media share losses and transforming its business model at the worst possible time with Zuckerberg needing to lead this perfect storm,” he said. to say.
Insider Intelligence analyst Debra Aho Williamson said the company was once seen as a trailblazer, but that’s no longer the case.
“As Facebook Inc., it was a revolutionary company that changed the way people communicate and the way marketers interact with consumers,” he said. “Today he is no longer this innovative innovator.”