On Feb.3rd, Meta Platforms Inc., formerly known as Facebook, made headlines for losing nearly 30 percent of its market value in just one day. The tech giant lost $230 billion, setting the record for the largest wipeout of company value in stock market history.
There are many reasons why Meta Platforms saw this drastic drop in their company value.
In the previous decade, Meta Platforms have had a large grip on the social media market. Their flagship platform Facebook performed well and reached over one billion daily users. The company’s acquisitions of Instagram and WhatsApp allowed it to occupy other niches in the online market.
Another factor that allowed Facebook to generate so much revenue was its hotly debated advertisement policies. Apps like Facebook and Instagram would record multiple metrics about their users, tracking where they go on their apps and what sorts of things they examined.
This tracking allowed them to more effectively target their ads and make a mint on selling their users’ data to various entities.
However, many factors that allowed Meta Platforms to sit at the top of the heap are becoming undermined in recent times.
Firstly, other parties have targeted Meta Platforms’ ownership of many other social media apps. In 2020, a Congressional hearing decided that the company must eventually sell off Instagram and WhatsApp in a surprising use of antitrust law.
One of the biggest elephants in the room is TikTok. The relatively new app has taken the United States and the rest of the world by storm. The app also ranges around the one billion mark in terms of daily users, but more importantly, the time users spend on the app is far above that of other social media platforms.
TikTok is especially popular amongst young people, who have a disproportionate effect on broader pop culture in America. This critical demographic already prefers TikTok over other platforms oriented towards them, such as Instagram and Snapchat.
Facebook’s user base is also rapidly aging as young people flee to Tiktok or Instagram in droves, and it becomes far more of a place for older demographics.
While these factors impacted Meta Platforms’ public perception, other events have eaten directly into their bottom line.
Apple recently created a feature on all of their devices that would allow users to opt-out of the digital tracking that apps like Facebook and Instagram use. This tracking directly impacts Meta Platforms’ ability to market and sell their users’ information effectively.
Mark Zuckerburg and the people in charge of Meta Platforms can see the writing on the wall. The business model that saw them reach never before seen heights over the past two decades is starting to run out of steam.
This model is a significant reason the company made a large pivot last year. They changed their company’s name entirely and went all-in on a new initiative, the Metaverse.
While the long-term success of the Metaverse is challenging to assess, there is no doubt that many investors doubt the company’s bold decision.
A degradation of Meta Platforms’ current business practices, mixed with uncertainty about their future ventures, were two of the main factors that contributed to this massive dive in their stock price.
Since Feb. 3rd, Meta Platforms’ stock has only continued to plummet. The company’s stock has dropped around $20 in price since its $90 drop on the 3rd.
