Since Facebook adopted the official name of Meta, in October 2021, the company has lost more than two-thirds of its value on the stock market. While the difficulties can’t be attributed to the name change alone, so far the “Meta era” hasn’t brought Mark Zuckerberg’s company much luck.
A month before the makeover, Meta, which controls the Instagram and WhatsApp platforms, hit a record high on the stock market. A few weeks later, the revelations of whistleblower Frances Haugen, a former Facebook employee, had a strong negative impact.
Haugen leaked thousands of internal documents to The Wall Street Journalwhich demonstrate how the company prioritized profits instead of addressing issues like online hate, violence and misinformation on its platforms.
The problems continued to mount through 2022. That year, Meta was officially the worst-performing company, according to the S&P 500 Index. The most recent quarterly results, released in late October, revealed a 4 percent drop in revenue. This is its slowest growth in a decade and it also has to do with the loss of importance in the area of advertising.
Ad revenue is falling rapidly in the face of stiff competition from companies like TikTok, Amazon, Microsoft and Apple. Likewise, as a consequence of inflation and the rise in interest rates, Meta has been forced to reduce the advertising budget.
Metaverse, too expensive a project?
Despite the low numbers and economic difficulties, the company continues to invest heavily in its metaverse projects, worrying investors involved in the process.
Over the past few years, Meta has spent billions on virtual reality labs, its metaverse units, though the exact amount is unknown. In October, the company revealed that losses from its virtual reality labs would grow “significantly” in 2023, having already reached close to $10 billion by the end of September 2022.
During a call with investors at the time, Zuckerberg said he would continue to invest heavily in the project, despite opposition from several investors, according to the report. Financial Times.
“There’s a lot of potential, but unfortunately the price tag to lift the project off the ground is astronomical,” Sophie Lund-Yates, an analyst at Hargreaves Lansdown, tells DW.
Fines for misuse of data
Furthermore, Meta is also under increasing legal pressure. In early January, the Irish Data Protection Commission fined Meta almost €400 million for breaches of the European Data Protection Regulation, in relation to its Facebook and Instagram services.
Meta has three months to abide by European law. This is the most recent example of the company’s battle to continue using its users’ data for advertising purposes as usual.
Max Schrems, an Austrian privacy rights advocate who has challenged Meta on several occasions, said the new community privacy legislation hits the company’s profits hard in the European Union. “Now you have to ask people if they want their data to be used for advertising purposes or not,” he added.
2023, a critical year
Technically, in 2023, Facebook celebrates its 20th anniversary, since in 2003 Zuckerberg designed “FaceMash” at Harvard University, the platform that a year later would launch as Facebook.
It will be a critical year. Meta revealed that by 2023, capital expenditures could reach $39 billion as the company looks to ramp up its investments in virtual reality labs and the metaverse. The company’s shares fell 25 percent in just one day when the news broke in October.
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Will Meta’s problems continue in 2023? | DW | 12.01.2023