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Meta’s stock price tumbled more than 20 percent on Feb. 2, after the company confirmed that Facebook’s global user growth has stagnated ...
Meta’s stock price plummeted nearly 24 percent in trading Thursday, dropping to about $246 per share and wiping more than $200 billion off its market value. The company is facing challenges on multiple fronts, as competitor TikTok booms, federal and international regulators scrutinize its business practices, and it begins a lofty transition to focus on the “metaverse.”
It adds up to a dizzying blow for a company that has long been defined by its relentless obsession with growth. The social network’s meteoric rise from a Harvard dorm room in 2004 to 1 billion monthly active users in 2012 — and then 2 billion just five years later — was fueled by a mission to connect the world, including efforts to bring more people online in developing countries so it could sign them up, too.
Its newest ambition is off to a slow start, at least by one key metric. Facebook showed for the first time on Wednesday how much of a money-losing proposition its investment in virtual- and augmented-reality hardware is — the suite of products the company dubs the metaverse.
Facebook Reality Labs, the company’s hardware division that builds the Oculus Quest headset, lost $3.3 billion in the quarter, despite bringing in $877 million in revenue. But even that figure is a tiny fraction of Facebook’s total revenue — $33.67 billion last quarter — primarily derived from targeted advertising on its main social network.
The company has made significant investments toward its aspiration of becoming a hardware giant, including hiring over 10,000 people and rebranding itself to Meta. But that transition is still in its early days. “Last year was about putting a stake in the ground for where we are heading; this year is going to be about executing,” CEO Mark Zuckerberg said on the company’s earnings call.
Executives hope that the company can reinvent itself with a focus on hardware, and that doing so will distract from its political problems. Tens of thousands of internal Facebook documents brought forth by a whistleblower last year revealed that it is accelerating societal polarization and that its algorithms have amplified misinformation and helped violent groups organize on the platform. The company is under intense government scrutiny, facing a major antitrust case in the United States and expected laws in Europe that could transform its business. It recently shuttered its cryptocurrency project, Diem, in response to intractable political pushback.
Facebook’s user growth has stalled in the United States and Europe for the past several years, but the company previously made up for it by consistently adding users all over the world. These new numbers, which show a dip in daily active users on the Facebook app, suggest that Facebook is becoming saturated globally, as well — a trend that demonstrates another reason the company is pushing so forcefully into new arenas such as hardware.
But not all growth trends were negative. The company’s family of apps, which encompass Instagram, WhatsApp and Messenger continued to modestly add users. The number logging in monthly to Facebook continued to grow, even as the number of daily users dropped. And the company continued to earn slightly more revenue per user, as well.
The company also said it was changing its stock ticker symbol to META from FB. It changed its corporate name from Facebook to Meta in October, saying at the time that it wanted to reflect its focus on the metaverse. But the change also came amid regulatory scrutiny of the company’s size and power, which was heightened after whistleblower Frances Haugen turned over internal company documents to Congress and the U.S. Securities and Exchange Commission.
Zuckerberg spoke several times on the earnings call about the competitive threat the company faces from video platform TikTok, and he explained that this competition was the reason the company was pushing hard to develop its short-form video product, Reels.
Zuckerberg conceded on a call with investors that the company faces growing competition in the race to capture people’s attention online and would need to work to make sure Reels brought in more money.
“People have a lot of choices for how they want to spend their time, and apps like TikTok are growing very quickly,” he said. “And this is why our focus on Reels is so important over the long term.” But the CEO’s unusually frequent references to competition also could be read as a message to critics who say the company is an all-powerful monopoly.