Meta’s Value Has Plunged By $700 Billion. What’s The Reason For This Downward Spiral?

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Meta, previously known as Facebook, has made considerable investments in the Metaverse but has not achieved the expected results from its venture. After an earnings report was published last week, Meta stocks dropped 24% on October 24, reaching their lowest point in over four years. The company is experiencing a major downfall. Let’s look at what’s happening with Meta and what’s contributing to its decline.

The Downfall of Meta

Although the tech world has suffered this year, Meta’s stock decline has been much more rapid. Shares of Meta have dropped 67%, as opposed to the NASDAQ’s 31% decline. The downfall of Meta resulted in a devastating loss of almost $700 billion in market price.

Facebook continued on the rise last autumn, and its market value peaked in September 2021 at over $1 trillion. As marketers raced to Instagram and Facebook to access their thousands of users, revenue and earnings soared.

The market value of Meta decreased from over $1 trillion in September 2021 to $268 billion now. Late in October, shares made some progress again, increasing by $1.72 and reaching $99.66 for each share. The company’s initiatives raise concerns about its all-in wager on the Metaverse and whether the social media corporation could share the fate of other major corporations whose future bets haven’t been profitable. The businesses that looked promising when they were new and expanding quickly now resemble rust-belt enterprises that fluctuate with the economic cycle.

As the economy weakens and advertisers reduce spending, Meta’s primary Facebook business will probably experience difficulties in the foreseeable future. The damage to Meta has also depleted Zuckerberg’s wealth due to his 13 percent ownership share, which accounts for most of his wealth. As per the Bloomberg Billionaires Index, on October 27, 2022, Zuckerberg’s net worth was $37.7 billion, having lost approximately $88 billion in income in the previous year.

A decline in the Number of Users

In September, Facebook had an enormous network of 1.98 billion daily users, a 3% year-over-year rise. Although that might sound commendable, the platform hasn’t experienced the same level of growth in recent years.

The downturn also follows Facebook’s announcement in February that it had dropped users for the first time. The massively profitable social media platform Meta is facing competition from startups like TikTok, which is attracting younger users in today’s age.

With its older demographics, Facebook is no longer able to effectively serve this generation, yet TikTok is doing an excellent job. This explains its eagerness to revitalize Reels and to give young adults a higher priority in its other services.

Loss of $9.4 Billion

Zuckerberg assured investors that he is fairly sure things are moving in the right direction. However, they are not convinced. The business is making a bet on its capacity to develop into a virtual reality powerhouse.

The early results for Meta have been bleak, although large corporations can take several years to carry out such strategic transitions. Meta’s Metaverse division, Reality Labs, has lost $9.4 billion in the year’s first nine months. It is anticipated that in 2023, the unit’s operational losses will be much higher.

Investors are highly skeptical since users aren’t flocking toward the Metaverse. Horizon Worlds, Meta’s latest virtual world, has lowered its target for active monthly users from 500,000 down to 280,000 but is still drawing less than 200,000 users.

Final Thoughts

Meta is dealing with considerable setbacks on the advertising front as well. The company cites an unstable and confusing macroeconomic environment for ads. As a result, advertisers are limiting their expenditures.

Meta is also considering how Apple’s privacy reforms would affect the apps installed on its devices. Consumers can now stop applications from tracking them, a shift that Facebook has estimated will cost the company $10 billion this year. Hence, the future does not look great for Meta.