Facebook share price crashes 20% as users fall for first time ever

While headline figures were positive, Facebook has something in common with Netflix. Its sky-high valuation is based on continued explosive growth. And while the fall in active users was minimal, it could signify that those days are over.

CEO Mark Zuckerberg highlighted that competition is ‘having an impact on our business…people have a lot of choices for how they want to spend their time and apps like TikTok are growing very quickly.’ Accordingly, the company is transitioning to ‘short-form video like Reels…our fastest growing content format by far.’

But this shift will be at the expense of ‘higher monetizing surfaces’ such as News Feed, while the renewed focus on a younger audience will put ‘pressure on impression growth.’ But Zuckerberg is ‘confident that leaning harder into these trends is the right short-term tradeoff to make in order to get long-term gains’ arguing Meta has ‘made these types of transitions before with mobile feed and Stories.’

Of course, TikTok owner ByteDance may only be worth $140 billion. Meta could take the same approach it did with Instagram and WhatsApp, and simply buy the platform. But with Federal Trade Commission Chair Lina Khan already investigating a similar metaverse deal between Microsoft and Activision, the chances of regulatory approval are slim.

Facing increasing competition, Zuckerberg has highlighted that ‘an ‘investment priority here is the metaverse.’ It spent over $10 billion on the metaverse-focussed Reality Labs division in 2021. And the company is now building the AI Research SuperCluster, which ‘will be the world’s fastest supercomputer.’

But Zuckerberg accepts the ‘fully realized vision is still a ways off, and although the direction is clear, our path ahead is not perfectly defined.’ And this polarising direction parallels that of similarly troubled Tesla. With its rivals spending billions on EVs, Tesla is spending 2022 focussing on a humanoid ‘Optimus’ robot which CEO Elon Musk believes could become ‘more significant’ than the car business.

The Facebook share price has two problems. On one hand, it faces competition from TikTok for video, Slack and Discord for work, and Snapchat for messaging. Zuckerberg knows that ‘people increasingly want to share more things in messages that they would’ve previously maybe posted to feed.’ It risks becoming a non-specialist, with its market share slowly chipped away over the years.

And on the other, its transition to the metaverse will cost billions, and could fail at any time. Of course, when companies like Facebook and Tesla first launched, few could predict their long-term impact on the modern world. Today’s Facebook share price could be tomorrow’s deal.

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