The Story of Meta

By Christopher Fashek | February 24, 2022

For the past decade, big tech has dominated the world economy, soaring to new heights each year. The big five of Apple, Amazon, Alphabet, Microsoft, and Meta are each members of the one trillion club, the elusive list of companies which have crossed a market capitalization of over one trillion dollars. However, 2022 has proved a rough year for these seemingly invincible corporations. Meta has so far been the hardest hit. Recently renamed from Facebook, Meta shocked investors in their latest earnings release, causing an overnight drop of 30%. In one day over $250 billion dollars of market capitalization was erased, the worst one-day loss in U.S. history.

At the core of Meta’s poor earnings report was the shocking news that daily active users (DAUs) declined. This decline in Meta’s user base was a first for the company and spooked investors who had for so long relied on their pattern of continuous growth. In an address to shareholders, CEO Mark Zuckerberg noted the threat of new competitors such as TikTok on their platform. The short video form that TikTok offers has quickly gained huge success among young people, and Meta plans to focus on its TikTok equivalent: Instagram Reels. In addition, changes in Apple’s iOS software have harmed Meta’s advertising revenue. Meta’s past advertising success has largely stemmed from its ability to tailor ads to users. However, Apple’s new update limits apps like Facebook and Instagram from tracking user habits. Less data is available for Meta to tailor their ads, and as a result Meta’s ad revenue has suffered. The company estimates that its 2022 ad revenue will fall by $10B due to Apple’s changes.

Meta’s place among the big tech giants looks increasingly shaky. However, the company has navigated away from past problems before. In 2014, much of Instagram’s success was threatened by Snapchat Stories. Instagram, however, released its own take on Stories and quickly gained user share from Snapchat. CEO, Mark Zuckerberg, has not shied away from bold moves either. The company’s recent name change reflects another transition. Zuckerberg is betting big on the ‘Metaverse’, which he believes will be the successor to the mobile Internet. The Metaverse will combine virtual reality with real life and in 2021 alone, Meta invested $10B in the project. Only time will tell if this big investment pays off, but one thing is clear: Meta is in transition.

Edited by Zachary Elias