Menlo Park, San Francisco Actually, Mark Zuckerberg wanted to present his long-term visions of a digital world in the Metaverse. But when the quarterly and annual figures were presented on Wednesday, the analysts wanted to know one thing above all from the CEO of the Facebook group: How bad is the situation?
So far, Zuckerberg and his company, which now operates under the name Meta, have primarily stood for strong user growth. But in the final quarter, Facebook had to admit that the number of daily active users had fallen by around one million people to 1.929 billion people compared to the previous quarter. In the previous quarter, it had grown by around 25 million.
That wasn’t the only bad news Zuckerberg had to deliver. Group sales in the fourth quarter grew by a fifth compared to the previous year to just under $33.7 billion.
But the profit fell by eight percent to about 10.3 billion dollars. In addition, the outlook for the coming quarter was weaker than expected by analysts.
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In the first three months of 2022, Zuckerberg expects sales to grow by three to eleven percent compared to the same quarter last year, which would correspond to $27 to $29 billion. Analysts, on the other hand, had assumed a target of around $30.3 billion.
Crash costs Facebook $200 billion in market value
This mix of setbacks led to a slump in the Meta share of more than 20 percent after trading. Arithmetically, Facebook lost around 200 billion dollars in market value within a few minutes. That’s more than Deutsche Telekom and Daimler are worth together on the stock markets.
Investors are understandably concerned about Meta, said Hargreaves Lansdown analyst Laura Hoy. The tech whiz said, “Meta CEO Mark Zuckerberg may want to lure the world into an alternate reality, but disappointing fourth-quarter results quickly burst his Metaverse bubble.”
In the background the logos of the meta offshoots Facebook, Messenger, Instagram, Whatsapp and Oculus.
(Photo: dpa)
For Hoy, the Facebook group is not experiencing a one-off shock, but could rather be facing a difficult year. “Facebook’s massive size and impressive reach combined with a rock-solid balance sheet means it has potential over the longer term, but next year is likely to be a bumpy and expensive ride.”
Zuckerberg wants to ‘rebuild’ advertising business
Another concern for investors is the Facebook group’s advertising business. The group of companies continues to depend on advertising for its revenues. But business is difficult.
One reason is the technology group Apple, which has implemented new privacy settings in its mobile operating system iOS. Since last year, app providers like Facebook have had to ask users on Apple devices like iPhones or iPads whether they can track their behavior across different services and websites for advertising purposes. Many iPhone customers reject this. As a result, Facebook knows less about its users. The company can no longer display ads so precisely and therefore receives less money from advertisers.
In addition, a number of countries want to regulate the advertising business more closely. The European Union is preparing a law that is likely to restrict the advertising business of platforms like Facebook more in the future. The EU Parliament had spoken out in favor of no longer allowing advertising based on sensitive personal data such as health, religion or sexual orientation.
>> Read about this: The EU finally has an answer to the destructive power of social media
Zuckerberg said, “With Apple’s iOS changes and new regulations in Europe, a clear trend is emerging: there is less data available to serve personalized advertising.”
But people wanted to keep seeing “relevant ads,” Zuckerberg said. And companies wanted to reach the right customers. “As a result, we’re rebuilding much of our ads infrastructure so we can continue to grow and deliver high-quality personalized ads,” the CEO continued. However, Zuckerberg left it largely open how exactly the conversion should look like.
Meta’s CFO, Dave Wehner, on the other hand, criticized Apple for the impact on its advertising business. The actions of the tech group will have “economic effects” on the advertising business in the order of around ten billion dollars in 2022. In a company statement, Meta stated, “We anticipate a slight increase in targeting and measurement headwinds due to changes in platforms and regulations.”
Virtual Reality Business Will Lose $10 Billion In 2021
For CEO Zuckerberg, the future of the company rests on the virtual reality business. So far, however, Meta has largely concealed specific figures on current activities in this area.
This changed to some extent when the quarterly figures were presented. Zuckerberg presented the designated segment “Reality Labs” for the first time. The division’s sales increased from $717 to $837 million in the same quarter last year.
However, Meta does not make a profit with the business. On the contrary, the group is accumulating huge losses in this area. For the fourth quarter of 2021, Zuckerberg reported a loss of around $3.3 billion for “Reality Labs”, for the full year it was almost $10.2 billion.
Mike Proulx, director of research at analyst Forrester, says the focus on the metaverse has had only superficial success for Zuckerberg so far. In a survey in December, around 47 percent of Americans with internet access connected Zuckerberg’s company Meta to the Metaverse. But only 17 percent of those surveyed also stated that they perceived meta as a leader in building the metaverse.
While many companies are pushing for solutions to build a digital world, Facebook needs a clear strategy. “No single corporation can or should own or dominate the metaverse,” Proulx urges. “There remains concern that the challenges of the past will follow from Facebook Meta into the Metaverse. The company needs to convince consumers that Meta’s expression of the metaverse is a good thing.”
Facebook still has major problems curbing hate speech, harassment and calls for violence. How comparable problems are to be prevented in a virtual world is still an open question.
Tiktok becomes a strong rival
Before Zuckerberg can successfully lead his company into building a digital world, he must first bind and retain the existing user base. But there are significant problems with this goal, Proulx warns. The short video platform Tiktok has become a popular product among young people.
Zuckerberg tried to counter the trend by having Facebook and other meta-corporate services like Instagram simply copy the format. With Reels, there is a video format on Facebook that is comparable to Tiktok, which the group is currently showing more and more in the USA.
“Tiktok is a strong competitor,” Zuckerberg admitted when presenting the annual figures. Due to the strength of Tiktok, Facebook needs a good answer to reach the younger generation.
Analyst Proulx says: “Simply copying Tiktok’s features will not be enough.”
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