Is Meta a sinking ship: Market valuation declined by 50% in just 6 months

The market valuation of Facebook rechristened as Meta has gone down by 50% within just 6 months. More than $500 billion is down the drain and the company is staring at the bleak future in absence of excitement among users towards metaverse. Is this is beginning of the end of the data-hungry beast?

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Turns out, despite Mark Zuckerberg burning tens of millions of dollars in rebranding activities a majority of people still struggle to recall Facebook when they hear the word Meta. In fact, the new name of Facebook appears to be a bad omen for Zuckerberg who was riding high on success until he decided to look beyond Facebook!

Barely 6 months ago, little did anyone know that Meta will lose half a trillion dollars in the next six months, and a lion’s share of it would be lost within a day!

As of February 24, 2022, the market value of Facebook rechristened as Meta has tanked drastically, and now it’s staring at a bleak future. Between August 2021 and February 24, 2022, Meta’s market value has declined by 49%, leaving investors shocked and stunned. What’s even more horrifying is that the upcoming months will be more challenging for Zuckerberg and his team. On one side, Apple is adamant about tightening the noose around Facebook, on the other hand, Google is also reportedly considering introducing users’ privacy policies similar to Apple. If that happens all the revenue streams of Meta will be destroyed!

On February 24, 2022, Meta’s market valuation sunk to $538 billion. The internet giant was at the helm after joining the trillion-dollar club in August last year when its market cap ballooned to $1.07 trillion.

Meta’s half-a-trillion-dollar decline has resulted in a drop in its ranking and sliding out from the list of the world’s top 10 public listed companies by market capitalisation. The company is now ranked at 11th position following Nvidia and Tencent.

The current challenge with Meta does not stem from the rebranding but is the result of the privacy changes introduced by Apple with iOS 14. Apple has given more control to iPhone and iPad users by allowing them to choose whether they want to opt for targeted ads, and block apps from tracking behavior across different apps. Meta claims that the new policy will result in financial damage amounting to $10 billion this year. The market reaction to such discloser was unexpected; Nearly $232 billion vaporized from Meta’s market capitalization within a day, and we analyzed it well to find that it was just the tip of the iceberg.

But the problem for Meta doesn’t end with Apple. Taking a cue from Apple’s policy, Google – which is also under tremendous pressure from regulators to have more users’ privacy-friendly policies – is gearing up for the introduction of similar privacy features through its privacy Sandbox on Android. The implementation and restrictions, however, may not be as strict as Apple’s and aren’t expected to be in place for more than two years.

It’s important to note that advertising accounts for over 97% of Meta’s revenue, and such privacy policy changes have a direct adverse impact on revenue books.

On one hand, Meta struggled to deal with Apple and Google, on the other hand, a new challenge from Facebook is worsening the situation for Zuckerberg & Team.

The latest earnings report disclosed that the social media platform witnessed a drop in its daily active users for the very first time in history. As a result, its share price plummeted by 20 percent. If that wasn’t enough to deter investors, an additional loss of $10.2 billion recorded during the last year by its AR/VR division called Reality Labs which is an integral part of the metaverse plan added fuel to the fire which caused unprecedented damage.

The past performance of Meta is not the only reason that dragged the market valuation to a record low level. Realization of the future potential of metaverse, which Meta is banking big time, has emerged as another big challenge for Zuckerberg & Team.

While a lot of companies are looking to venture into the metaverse concept, which is viewed as a VR model of Second Life, a majority of consumers are still not excited about it. The metaverse, Web 3.0, and NFTs could attract companies looking to profit from the new futuristic technologies and products but the buzzwords can leave the real users apathetic at best or hostile at worst. Given Meta’s bad reputation when it comes to handling users’ privacy, people are concerned about the company’s eye-tracking ad technology.

During the fourth quarter of fiscal 2021 Meta’s revenue grew by 20% YoY to $33.76 billion. At the same time, the collective daily active users of the family of apps (Facebook + Instagram + Whatsapp) also increased, albeit marginally. All of it indicates that despite increasing challenges and declining Facebook users the financial status of the company is strengthening with each passing quarter. But the road ahead is not going to be a cakewalk for Zuckerberg. The advertising business is under constant threat from none other than Apple and Google, and metaverse may not receive the revolutionary response as Facebook received after the launch in 2004. Unless Zuckerberg has started looking beyond ad dollars, he will have to think out-of-box to secure its biggest revenue stream.

Few experts believe that Facebook has already realized that it’s high time to have a self-controlled ecosystem to safeguard its dominant position, and future as well. Just like Google and Apple, Meta will have to have its own ecosystem to reduce its dependency on third-party.

And, that’s where FacePhone comes into the picture!

Let’s be clear, reinventing the whole wheel will not help Facebook. Hence, a new open-source platform is out of the question. Microsoft learned it hard way and abandoned its Windows Phone OS after struggling for years in 2017.

So, what’s the way out for Facebook?

Meat’s reliance on data-hungry advertising business is no secret. And, to keep it intact it doesn’t need to have another OS. All it needs is the way people intact with it. Meta should enhance the user experience to make it rich and in line with its core social mission.

Emre Barack Sokullu, an entrepreneur from Turkey, has explained it in detail. He explains how Facebook can fork Android and avoid further attacks similar to Apple in the future, forever.

But FacePhone is suggestive; Given the current focus of Zuckerberg & team, it’s quite evident that it wants to reduce its reliance on advertising business to a great extent. And, Metaverse, which has diversified revenue models, could be the ecosystem the company needs in order to achieve it.

Whatever be the case, one thing is certain; it’s a real test of Zuckerberg’s leadership & entrepreneurial skills now. The next two years will be defining for Meta and Zuckerberg. The company is already under tremendous pressure after a jaw-dropping loss of $500 billion. At a time when arch rivals Apple, Microsoft, Amazon, and Google are eyeing attaining a $3 trillion valuation, the current crisis has pushed Meta back and has widened the gap. Now all eyes will be set on Zuckerberg to see how will he bring back the lost glory of Meta. If he succeeds, don’t be surprised to see Meta on the path of leapfrogging Apple to claim the crown of the world’s most valuable publicly-traded company.


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