This post has been updated to include Thursday morning’s share prices.
At some point in the future, when the soul of Mark Zuckerberg has ascended to the heavenverse and is standing outside the pearly gates watching the Instagram Reels of his life, today will stand out as a day of reckoning for the 37-year-old CEO of Meta Platforms, the parent company of Facebook, Instagram, and WhatsApp. There he is, just before 4 p.m., ready to report his company’s fourth-quarter earnings. He knows they won’t be taken well — a rarity for the tech wizard who built an empire no matter how many whistleblowers, Russian bots, and anti-tech campaigns the world threw at it. But this report will show something different: that the way he did things is no longer working, that rivals have outmaneuvered him, and that his vision for the future in the metaverse isn’t shared by the real world. It would be a bad time and, perhaps, a demarcation that his moment has passed.
This is all to say that Meta, a company with a market value of $900 billion at 3:59 p.m., was suddenly worth about $720 billion just 30 minutes later — reflecting a spectacular 22 percent fall in after-hours trading for one of the largest and most powerful companies in the world. [Update: Meta’s stock traded 25 percent lower when stock markets opened on Thursday, bringing its market value around $670 billion.] At the heart of the nosedive are two things: a $3.3 billion loss trying to make its metaverse ambitions a reality and a slowdown in advertising revenue. Part of that is coming directly from Tim Cook, the Apple CEO, who started blocking ad tracking on its devices. That’s a problem because what made Facebook and the whole suite of related apps so successful in the first place was that they were better at advertising, and could command more money, than their rivals. The other thing, Zuckerberg acknowledged, is that people are just spending more time watching videos on TikTok. “Although our direction is clear, it seems that our path ahead is not quite perfectly defined,” he said during an investor call after the report’s release. Could anything be less inspiring to Wall Street’s ears? Everyone is going toward the direction of making billions of dollars — it’s the path. That’s the whole point!
And now, after years of predictions that a reckoning would come, it seems people are finally quitting the apps. Maybe it was Frances Haugen, the whistleblower who this summer unleashed a flurry of internal documents that showed the company knew its products were harming children’s mental health at precisely the time it was trying to introduce an Instagram for children under 13. Whatever the reason, its daily active users actually shrank worldwide — with the U.S. and Canadian user base staying stagnant since the first quarter of 2020. Yes, the company still made $39 billion in profit for the year, a staggering sum no matter how you slice it.
At times, an earnings report causes a stock’s price to fall precipitously only for it to moderate in the hour or so after, when the company’s executives calm down Wall Street by saying that all is not so bad. This time, it didn’t work that way. In fact, Facebook’s price continued to slide even lower. Zuckerberg, in his trademark nasal drawl, seemed to acknowledge that the tide was turning against the business he has been running for 18 years as of this week. “The balance of content that people see in feeds is shifted a little bit more towards stuff that isn’t coming from their friends, which they may discuss with their friends, but it’s kind of shifting towards more public content,” he said. The upshot here is that the voyeuristic behaviors that made social media as we know it so profitable — what are my friends talking about? Who did my high school ex marry? — were actually starting to fade.
Zuckerberg had been preparing shareholders for this. When he released his long, cringey video this summer about the metaverse — shorthand for an immersive internet that’s more like a video game, a digital space to sell unlimited ads beyond the confines of your phone screen — he was candid that it would take years, maybe a decade, before it would really start to take hold. During the earnings call, he said he believed there was a kind of evolution of the internet, from text to pictures to short videos, and the next leap would be the kind of 3-D avatars being pushed for such thrilling things as business meetings and conference calls. To be sure, everyone is sick of the internet as it is now. That’s why so many people are trying to come up with Web3, a loosely defined group of buzzwords that something something blockchain yadda yadda. But Wall Street is always forward-looking. It’s willing to throw ridiculous amounts of money at people who dream big even if they’re not making money — just ask Elon Musk. If people are buying Zuckerberg’s version of the internet’s future, they would be more excited about how he spent nearly $10 billion during the past year to build it. As of now, Facebook looks more and more like the past.