Why the 'End of Meta' Happens Today

Meta's Market Cap is Shrinking at an Incredible Rate in 2022

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Is this the end of Facebook?

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Earnings Broad Based Worries Accumulating

Hey Guys,

This is going to be a rant, and no apologies for what I’m about to say.

Silicon Valley greed has a very unfortunate end-game. Mark stands alone as shareholders are about to distance themselves from his ambition. It's going to be painful. I would say it's unprecedented in the history of the internet, but we knew this day would arrive sooner or later.

This is about Facebook’s earnings disappointment and the greatest drop today in its history, October 27th, 2022. (This was written the day before).

I’m starting to get worried for Mark Zuckerberg and his future. Meta reported a second straight quarterly revenue decline and is forecasting another drop in the fourth quarter.

The problem is his investment in VR and the Metaverse has zero confidence, and he’s not pivoting in the face of that reality.

I’ve never seen anything like it. The stock was already down 61.7% year to date in 2022 on part with other growth-stocks, but after-hours now it’s down another 19.66%. This is the point where history will say Web 2 died.

I’m not even kidding, all the promises and gimmicks of Silicon Valley have led us to this point, a point where we cannot trust the Ad-based internet, even as TikTok and Apple are essentially killing Facebook. 20 years later, we are so over it.

How Not to Pivot

• Mark never diversified his business and kept too much centralized control, therefore increasing the probability of catastrophic errors of judgement. In this this horrible VR product is the nail in the coffin.
• The company’s Reality Labs division, which houses its VR headsets, lost over $9 billion in the first three quarters.
• According to CNBC, the stock plunged in extended trading after already losing two-thirds of its value so far this year.

I was afraid to look at the after-hours numbers, but this is just off the charts. This is like ByteDance winning, and Facebook losing, a part of Silicon Valley crumbling forever down into the cliffs of posterity.

Facebook is burning cash at exactly the wrong time. VR may never be stick, even if we had a good product. Humanity just doesn’t love VR like it enjoys gaming, something Microsoft understood. Microsoft built an empire for the future of gaming, and Facebook didn’t build anything new after acquiring Instagram and WhatsApp, heck it didn’t even understand mobile video.

It makes Silicon Valley look really bad and less trustworthy.

As Web 2 stumbles, Web 3 is in the heart of a crypto winter and looks even more cringe.

Meta was unable to compete with TikTok, because it’s not a builder, it’s a legacy advertiser now. ByteDance gambles on $20 Billion in marketing and Ad spend to power TikTok, while Facebook gambled on untested and immature Virtual Reality and tried to pivot its entire identity into an unproven domain. How to kill your company Mark Zuckerberg, what an epic fail.

The Meta company was worth $349 Billion before these Earnings, but what will it be worth after the fall? It’s a stock crash unlike we have seen in recent memory, a core NASDAQ 100 player basically falling off the map. There’s only one person to blame, and his name is Mark Zuckerberg. He created a poorer internet for us all, clearly built on manically motivated greed. Shareholders are not impressed!

How do you even reconcile such a failure of leadership at such a grand scale in BigTech? Such an immature business model putting all of your eggs into just digital advertising without fortifying your future? Buying up and squashing rivals, as if cloning your competitors wasn’t enough? It’s almost comical to see how Facebook, Twitter and LinkedIn have aged. All this time they hurt Snap, Reddit, Pinterest, Discord and other more vibrant real communities.

Whatever damage YouTube and Facebook did to the ecosystem with their duopoly, we’ll now live in a world where TikTok, Amazon, Apple, Microsoft, Netflix and others are starting to win in advertising too. At least advertising will have more options after Facebook. This is a good example of how Silicon Valley monopoly capitalism was not good for the ecosystem, and let China in the back door. Government didn’t want to regulate BigTech and we’ll all pay the price.

Meta Earnings October, 2022 - Q4

Facebook’s parent issued a weak forecast for the fourth quarter and came up well short of Wall Street’s expectations for earnings.

• Earnings per share (EPS): $1.64 vs $1.89 expected, according to Refinitiv
• Revenue: $27.71 billion vs. $27.38 billion expected, according to Refinitiv
• Daily Active Users (DAUs): 1.98 billion vs 1.98 billion expected, according to StreetAccount
• Monthly Active Users (MAUs): 2.96 billion vs 2.94 billion expected, according to StreetAccount
• Average Revenue per User (ARPU): $9.41 vs. $9.83 expected, according to StreetAccount

How could such a Titan like Facebook fall?

When you make nearly $28 billion in the Quarter and it’s the apocalypse for your company, you have to be pretty terrible at managing a company. It’s hard to even fathom. Trust has been broken on so many levels.

It no longer matters how many users WhatsApp, Instagram or Facebook have, shareholders are finally being honest. Apple’s new policies and TikTok’s momentum means Facebook doesn’t stand a chance in the new world. In reality even YouTube and Netflix are showing less numbers due to TikTok.

Meta is mostly facing its own stupidity. Analysts like to say Meta is contending with a broad slowdown in online ad spending, challenges from Apple’s iOS privacy update and increased competition from TikTok, as if these challenges are cyclical in nature. No they are not. They are game changers! They are somewhat permanent. A normal company would pivot, not attempt to take the entire company into a fantasy-land decades away! Good leaders are data-driven.

The Miss is Significant for Q3

The company said revenue for the fourth quarter will be $30 billion to $32.5 billion. Analysts were expecting sales of $32.2 billion.

• While revenue fell 4% in the third quarter;
• Meta’s costs and expenses rose 19% year over year to $22.1 billion.

There is a clear disconnect with reality! Is this self-sabotage or something else? How can you bet on the distant future when the history of VR is so shoddy and your product is so poor?

• Meta’s operating margin, or the profits left after accounting for costs to run the business, sank to 20% from 36% a year earlier.
• Overall net income was down 52% to $4.4 billion in the third quarter.

These are all pretty significant warning signs. The P/E of the stock price is going to be like a value trap soon enough. The market is screaming at Mark Zuckerberg, but he just isn’t listening. That’s a problem if you are a Facebook employee.

At its after-hours levels of about $108, Meta is trading at its lowest since March 2016. That’s as bad as Alibaba. But Alibaba is the leader of the Chinese Cloud and actually has a viable future.

Overspending on the ‘Meta’ part of its Business

Revenue in the Reality Labs unit, which houses the company’s virtual reality headsets and its futuristic metaverse business, fell by almost half from a year earlier to $285 million. Its loss widened to $3.67 billion from $2.63 billion in the same quarter last year.

VR is not a future anybody wants, even if it were a great product. A simple survey of Facebook’s users would have discovered this. Facebook is not Roblox and Instagram is certainly not TikTok, pretending to be what you are not is the ultimate way to destroy the credibility of your business.

• Reality Labs has lost $9.4 billion so far this year, and there’s no end in immediate sight.
• This is not a charity that’s a good bet to support. The graphics are many years old, the experience is so non-sensical even employees of Meta don’t use it.

It’s very bizarre what the leaders are saying:

• “We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Meta said.
• “Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”
• But how much of a long-run does Facebook even have? It’s a great company that’s 20 years old without a viable way forward.

It’s been a good run guys! Facebook made a lot of fat cats in Silicon Valley very wealthy. Shady people who are in turn creating more deceptive business models that will harm society. I’d go so far to say that the Facebook mafia are like a dystopia cult. Such is the decline of Silicon Valley we are going to witness.

Make no mistake, this is what happens when you put digital Advertising at the center of the internet like Google and Facebook decided to do, that was the “best idea” they could come up with.

But where does it lead? It leads to ruin.

Postscript

The most dangerous world is one where we give single men too much power. Power does corrupt. Zuck invading the Metaverse is like Putin in invading Ukraine, it’s just pure folly. It's not just "bad for the internet". It's not just premature and crazy-talk, it's profoundly self-destructive. When you surround yourself with loyalty you arrive at group-think and its worse than a diffusion of responsibility in your company.

Doing that is setting yourself up for failure. Mark Zuckerberg reiterated his commitment to spending billions of dollars developing the metaverse. Meta CEO Mark Zuckerberg sounded flabbergasted at times during a call with analysts explaining his company’s long-term bets.

Facebook never had to make a long-term bet in its life? It lucked out on timing and bullied all potential trending apps in its space, seemingly without regulatory consequences. It acquired WhatsApp and Instagram pumping its “user-numbers”, likely pumped up by fake accounts, and you end up being an easy target to be disrupted. So China can't beat you? Think again. Silicon Valley should be worried!

Yet on the Earnings Call, the company now called Meta literally said that “Reality Labs operating losses in 2023 will grow significantly year-over-year.” Talk about a dagger in the back to shareholders? It’s comical and tremendously sad to see how Silicon Valley turned out.

Nobody I know is feeling "patient" about Zuckerberg’s theatrics? When betting on Facebook has become betting on Zuck’s version of the Metaverse, who would jump? On moral grounds I personally do not use WhatsApp, I wonder how many out there feel the same way about this new expensive consumer gimmick which employs eye-tracking?

Meta’s stock going below a $100 price is shocking, but is now inevitable.

Thanks for reading!

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