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Article by Trinity Batt
In early February, Meta shares fell by 26.4 percent, representing over $230 billion of the company’s total market value. This is not only the greatest decrease in the market value of the company itself but it is also the largest one-day decline for a US company on the stock market. Formerly known as Facebook, Meta is the parent company of the Facebook platform and other platforms such as Instagram, Oculus and WhatsApp. This change is representative of the company’s aim to expand into virtual reality – specifically, becoming a metaverse company. In conjunction with this decline, Facebook’s Daily Active Users also fell which marks the first time this has happened since Facebook began. The net worth of the Chief Executive Officer of Meta, Mark Zuckerberg, is understood to have fell roughly by $29 billion. It may be unsurprising that Meta shares fell, considering recent market trends concerning technology shares but the extent to which this occurred is highly out of ordinary for the company with the only other comparable event in its history being the company’s market cap drop in 2018 of around $120 billion. Facebook’s plummet in market shares in 2018 may be attributed to the decrease in user-growth rate and pressures on the company to respond to privacy concerns. The situation today, however, is quite different.
Why did it happen?
TikTok, a platform under its parent company ByteDance, provides users with the ability to upload and digest short form videos. In Q4 of last year the company is understood to have had 1 billion global Monthly Active Users (the Facebook platform had 2.91 billion Monthly Active Users) and this figure is expected to continue to grow. Meta’s prediction that its Q1 revenue would be less than expected accounting for increasing competition from TikTok is unsurprising considering the huge younger audience which it attracts. The use of the short form video format is becoming increasingly popular on social media platforms and it is now made use of by most social media companies. This can be seen with Youtube Shorts for example which are short form videos on the app. Zuckerberg, in addressing the issue of Meta’s competition and Apple’s policy changes, referred to a shift to short form videos (Reels) and reconstructing Meta’s advertisement system. On the former point Zuckerberg also recognised that despite shifting efforts to adapt to meet user preferences for short form videos the growth of companies like TikTok is so great that such competition will still exist between them .
Meta has focused largely on its new endeavour of becoming a virtual reality company – the Metaverse – which is to be accessible through its platforms.
Perhaps it is such investment into the Metaverse, which may take many years to fully develop, and subsequent lesser attention and investment into ensuring that Meta’s platforms adapt alongside their competition and in response to data policy changes that has caused the company’s recent performance on the market. The viability of the Metaverse and its potential to operate in the future will continue to require investments and so it is necessary in the meantime for Meta to continue to perform well while it expands into virtual reality so as to acquire such investments. Naturally, the increased competition and difficulties faced in adapting to policy then take on a new dimension – not only are such factors affecting Meta’s current performance but it will also have an effect on the speed at which the shift to virtual reality occurs and the overall possibility of the Metaverse being developed.