Meta lost over a quarter of its value in a single day. That's almost $240 billion
Facebook parent company Meta had a very, very bad 24 hours. In a single day of trading, it watched almost $240 billion, or just over one quarter of its entire market value, vanish in a puff of investor panic.
The problems for the company began during the previous afternoon, when it released Q4 results that missed the $3.84 per share mark investors had set for its profits by $0.17, despite finishing the fourth quarter with revenues above expectations.
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This negative indicator was further compounded by Meta reporting its first-ever drop in daily active users. The decline was relatively slight, from 1.93 billion in Q3 to 1.929 billion in Q4, but it was enough to signify that Facebook's seemingly perpetual upward user trajectory was no longer a sure thing.
Results like these would have been problematic during any quarter, but they couldn't have come at a worse time for the would-be king of the metaverse. This is the first fiscal quarter since the company's decision to rename itself as Meta and split its focus, for the first time, to something other than social networking.
The newly-created Reality Labs (RL) division (which handles all augmented and virtual reality-related endeavors and sits at the heart of Meta's planned virtual universe) produced just $877 million in revenue and an operating loss of $3.3 billion. Meanwhile, the social networking-focused Family of Apps (FoA) division (which includes Facebook, Instagram, Messenger, WhatsApp, and other services), generated $32.794 billion in revenue for the quarter and reported an operating income of $15.89 billion.
Of course, no one expected Meta's foray into the VR/AR arena to produce massive profits immediately. But its worth noting that this increasingly questionable-looking decision to delve so deeply into the still nascent metaverse is occurring at a crucial time; Facebook's own CFO, David Wehner, mentioned in his Q4 financials statement that the company is facing "increased competition for people's time."
It appears a fair portion of that time may well be getting taken up by Meta's more social media-focused competition. Pinterest and Snap have both kept their sights firmly on the social networking market, and both companies just reported some of their best quarters ever: Pinterest grew 24% to exceed expectations while Snap soared even higher to 54%.
Of course, the shift away from its bread-and-butter money maker and toward the metaverse is far from Facebook's only concern. It's also facing opposition on its traditional user data collection revenue stream as well. This is thanks to Apple's decision to introduce its App Tracking Transparency (ATT) feature.
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The iOS maker's change in policy, which requires users to opt in to the type of behavior tracking Facebook largely relies on, seriously curtailed Meta's ability to collect data from iPhones and iPads. Meta estimated the reduction of data caused by Apple's decision will cost it $10 billion over the course of 2022.
To be fair, Snap has also complained about Apple's iOS changes. But, Snap wasn't just called out in front of the Australian Parliament for giving its non-US users less protection against harmful content than their domestic counterparts as a money-saving measure. This information was leaked by the same whistleblower who has been plaguing Meta for months now.
February 3, 2022 is by no means Facebook's first bad day. The question now is how much of a lasting impact the convergence of underwhelming financial performance, questionably-timed diversifications, and cumulative PR disasters will have on the company. We should begin to get some insight into what the future holds as soon as the opening bell on February 4. But, the full fallout that will results from a day like this may not be know for much, much longer.