ColdFusion - Why Meta Dropped 70%

Starting point is 00:00:00 Hi, welcome to another episode of Coldfusion. The company Meta has been in the news for multiple reasons lately. From staff hijacking user accounts and allegedly taking bribes to a falling stock price, mass layoffs, increasingly ineffective business model, and of course, a failing Metaverse project. Their most recent financial report showed a 52% decrease in net profit for the quarter. It seems like the company that everyone loves to hate is in serious trouble if nothing changes. In this episode, we will discuss the flailing of the once unstoppable giant.

Starting point is 00:00:35 You are watching Tull Fusion TV. Meta investors are not happy at all. They've seen flat growth, decreased revenue and profits. Less than a year ago, meta was valued at nearly a trillion dollars. Today, it's worth less than a third of that. To put it another way, the fall has been so dramatic that its stock price is back to January of 2016 levels. If you invested in Meta, Meta at that time without pulling profits, you've lost money. This year, Meta is down 70% making it the worst performing stock in the entire S&P 500. To begin to understand the full picture of why Metta is collapsing, we have to go back to 2005.

Starting point is 00:01:22 At this time, Facebook then president, Sean Parker, would help Mark Zuckerberg navigate his way around Silicon Valley, but he would also help Mark gain complete control of the company. Under the guidance of Sean, Zuckerberg would set up the company so he would be able to was essentially king. He overruled everyone, even the board of directors. He couldn't be touched and it would stay this way indefinitely. This dictatorship would come back to hurt the company. In the 2010s, users started to move from desktops to smartphones. Although Facebook adapted, Mark Zuckerberg still felt like they could have been more of a player in the hardware space. Facebook tried releasing their own smartphone in 2013, but the public thumbed their nose at it.

Starting point is 00:02:03 Mark needed to try something else, and in 2014, he would find it. When Zuckerberg saw an Oculus demo, he was sold. He was convinced that VR would be the future of computing. He would then buy Oculus for $2 billion, and went all in, even changing the company's name and spending $10 billion a year on research to make his vision a reality. And herein lies one of the major issues. Because Mark was king, nobody within the company could stop him, even if they thought it was a bad idea. Though, in my opinion, technology overall seems to be going in a direction where a widely used metaverse environment for the masses will become inevitable. A virtual space where an online life is lived in VR. But there's a problem.

Starting point is 00:02:47 Is this future five years away or 15 years away? If it's five years away, meta might be able to hang on and ride it out, but if it's 15 years away, this is a major issue and shareholders aren't going to tolerate it. For investors, it feels like Zuckerberg is hinging his tight-to-allegers. company on something that the world just isn't ready for yet. Apple successfully broke through this issue with the iPhone. Meta isn't on the same level here, or at least just yet. On the hardware side, they're doing some cool things and have sold over 10 million VR headsets, which is good, but on the software side, Meta's flagship Metaverse product, Horizon Worlds,

Starting point is 00:03:26 looks horrendous. Really, I can't believe that over $15 billion went into the creation of this. versus now loading. Create your avatar. You might be wondering, hey, what's going on with the resolution? Uh, let me show you what it's like if I uncrop it, okay? Bear in mind, I've done this before on Capture for other games on Oculus, right? That's not happened. I've never had it like kinda happened to that degree. So not a good start, and that's why I've had to crop it because I don't want to give, make people sick there. Avatar legs may not be available in all app experiences, well, I thought that was the... Getting point of the last conference. Just trying to navigate the menu.

Starting point is 00:04:11 Oh dear god. This only has 197 likes. The reason I'm drawing attention is this is probably the same first world it shows to everyone. And like only 200 people gave it a thumbs up. Where? Go to the arcade. The arcade. I will check out the arcade. Thank you so much guys. See you later, dude.

Starting point is 00:04:30 Wait, everyone's still in my ears. Can you hear me? Is he gone? He's dead. He died. He died. He died. He died. Why can I hear him? No, guys, I'm here!

Starting point is 00:04:39 I'm here! I'm trapped in the menu! Everybody to the arcade, I'm in the menu, friends! It crashed! $15 billion well spent. I think Zuckerberg isn't actually wrong that VR will be the technology that connects people in a way that other technology simply can't. But there's just so much work that needs to be done. As Palmer Lucky, the founder of the founder of

Starting point is 00:05:05 of Oculus puts it, Horizon Worlds is a poor product that isn't fun. Quote, it's terrible today, but it could be amazing in the future. And the thing is, it's not like creating a great VR experience is impossible. VR chat is already miles ahead in many aspects. In August of 2022, the vice president of Horizon Worlds left. It's not spelling the most confidence of behind-the-scenes activity. The second issue is the crippling of the main source of revenue for meta, targeted advertising, And once again, to fully understand this, we have to go back. This time to 2008. In this year, Facebook would hire Google ad executive Cheryl Stanberg as Chief Operating Officer.

Starting point is 00:05:49 In those early days, she would balance Mark's reckless behavior. But moreover, she was instrumental in creating what would propel Facebook into the stratosphere. Extremely effective advertising based on the personal data of users. It worked so well that very early employees became rich. This was great for wallets, but bad for consumers. Users absolutely hated it when they found out that they were being exploited, but it didn't matter because the company was making money hand over fist. Though without knowing it, Meta had now become vulnerable to any outside entity that choked

Starting point is 00:06:22 off its data collecting, and this is exactly what happened in 2021. Tim Cook would mandate that iPhone users could switch off their ad targeting and Meta lost billions. We've done a full episode on this, which I'll link below. Frankly, iPhone users tend to spend more money than Android ones, so this move by Apple severely hurt Facebook. According to David Wenner, META's chief financial officer, advertisers are now starting to move to Google.

Starting point is 00:06:49 With META's vaporized profits, all was now laid bare and open to clear scrutiny. Frankly, META is a company that isn't improving their core products. Improvements to user interface and user experiences are left on the back burner. Instead, Meta focuses on stealing other features from other platforms such as Reels from TikTok and implementing them into Instagram. But competing with one of the best social media algorithms on Earth is a tall task. Reels aren't as effective at making money as Instagram's other features. As for the user experience, Instagram is now choked with ads and is straying ever further

Starting point is 00:07:24 away from its original idea. For its first decade, back when it was Facebook, the firm used to innovate on the social media front. This stage is clearly over. In early 2022, long-time CEO Cheryl Sandberg, who was supposedly the adult in the room, left Meta. Now Mark Zuckerberg is a king without any guardrails. Most recently, Facebook has laid off 11,000 staff, or 13% of their workforce.

Starting point is 00:07:53 Even though higher interest rates are demolishing high-risk investments such as big tech, any stock falling by 70% in a year is nothing to sneeze at. Zuckerberg states that overinvestment was the issue. He doesn't seem to see doubling down on the metaverse as an issue to investors. On the 10th of November, in a call with investors, he would state that he thought the surge of e-commerce from COVID would be permanent. So, he significantly increased his investments. And, quote, unfortunately, this did not play out the way I expected. Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition and ad-signal loss have caused our revenue.

Starting point is 00:08:33 to be much lower than I'd expected. I got this wrong, and I take responsibility for that. Beyond financial woes, Mehta is facing investigations from the FTC and a whole host of lawmakers. Antitrusters looming and threatening either to break up the company or make it harder for them to simply acquire companies

Starting point is 00:08:51 like they could in the past. I also don't have to reiterate all the scandals, like Cambridge Analytica, leaked documents on mental health and social division. The demographic shift also isn't helping. TikTok has eaten Meta's lunch, both on Facebook and Instagram. According to Kevin Rose of the New York Times, despite older people generally having more funds,

Starting point is 00:09:11 advertisers love to follow the younger demographic. Long story short, Meta is in an identity crisis with a king who has tunnel vision. So what can be done? Well, looking at it from the outside, there should be some soul-searching. Meta is already two companies, so perhaps Mark should embrace this. One company is a pure tech.

Starting point is 00:09:33 company aiming to create the Metaverse. The other is a social media and advertising business, and this company has lost the attention of its CEO. Maybe it's time for the social media part to be a proper subsidiary run by another CEO. The only bright ray of hope is that Meta still has almost 4 billion customers. There's a lot of potential to turn it around. But one, will they? And two, do we even really want that? Let's just say, if we had a Metaverse for the masses, built by someone else, I wouldn't be sad. So what do you guys think? Feel free to discuss in the comment section below.

Starting point is 00:10:11 Anyway, that's about it from me. My name is Degogo and you've been watching Cold Fusion. Feel free to take a browse of the channel and see if you like anything else on here. And I'll catch you again soon for the next episode. Cheers, guys. Have a good one.

ColdFusion - Why Meta Dropped 70%

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