What’s the limit for Facebook’s market meltdown

Zuckerberg’s $10 billion bet on metaverse, terming it as the internet’s next generation is far from paying off

The meltdown of Facebook’s parent Meta Platforms Inc remains unabated as Tuesday witnessed a whopping 9.4% daily slide, falling behind Visa or other tech giants.

Meta, which owns Facebook and Instagram, was ranked fifth among US companies as of December 2021 but its sudden downfall began in February this year when the company suffered its biggest one-day wipeout with the stock plunging by 26%, or more than $230 billion.

Read: Hundreds across US protest Facebook allowing hate speech in India (November 15, 2021)

From a peak of $378 on Sep 10, 2021, the stock plummeted to $150 range on Sep 13, 2022. Among the US-based tech giants, the rank of Meta slipped to 10th with a $412 billion fall, amid fears of the potential effects of inflation on the advertising revenue.

“Meta, like the other social-media companies, has been negatively affected by the moves that Apple did in the advertising business as well as the general anticipation of lower ad spending as we might be going into a recession,” said Nick Mazing, the director of research at Sentieo.

“Additional factors include competition from TikTok and investor skepticism regarding the company’s metaverse efforts,” said Mazing, who’s been tracking the changes in market values over recent weeks.

Meltdown started in February
The crash of Meta coincided with a dismal earnings report and its chief executive Mark Zuckerberg’s plans to shift from social networking toward the so-called virtual world of the “metaverse.”

Despite modest gains on WhatsApp and Instagram, Facebook lost nearly half a million users in the fourth quarter results of this fiscal year compared to the third quarter figures.

Read: Web scraping: Meta suit triggers ethical debate (July 6, 2022)

The second major factor remains Apple’s change in ad structure that was projected to cost Meta $10 billion in revenue loss over the next year as the company was heavily dependent on Apple for user data and advertisements.

The downturn, in effect, owes to the emergence of a formidable rival in TikTok, a Chinese-backed app that has more than one billion users making it addictive for youngsters who are no longer active on Facebook. To counter TikTok, Meta introduced Instagram Reels but with little impact on TikTok.

Further, Zuckerberg’s bet of $10 billion on metaverse, terming it as the internet’s next generation is far from paying off, leave alone make the future positive.

Apart from these factors, Meta faces a specter of antitrust suits, multiple investigations, including the Federal Trade Commission and multiple state attorneys general probing whether Facebook acted in an anti-competitive manner.

According to Bill George, a senior fellow at Harvard Business School, the poor leadership skills of Zuckerberg are dragging Meta toward failure.

Read: Facebook stock plummets 26% in its biggest one-day drop ever (February 3, 2022)

“I think Facebook is not going to do well as long as he’s there,” George told CNBC. “He’s likely one of the reasons so many people are turning away from the company. He’s really lost his way.”

Bosses that lose sight of their most deeply held beliefs, values and purpose as a leader — especially in the name of money, fame or power — are doomed to fail, he warned, citing his research into high-profile corporate collapses.