Facebook owner Meta shares crash over 25%, blames Apple’s Policy Change and Increase in Competition

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Facebook owner Meta Platforms Inc. saw about a 26% dip in their stock on Thursday. This is the biggest stock plummet the company has seen since it got listed on Wall Street. It erased about $200 billion market capitalization of the company and $29 billion net worth of CEO Mark Zuckerberg. The company blamed Apple’s change in the privacy policy, growth in competition and supply chain disruption for the same during its fourth-quarter financial result.

Facebook’s Q4 2021 Earnings Report

The company reported Q4 2021 earnings of $10.3 billion compared to $11.2 billion from the last quarter of 2020. The company stated several factors that may have negatively impacted this quarter.

Meta (previously Facebook) has made heavy investments in its futuristic “metaverse” project but relies heavily on advertising revenue for income.

Apple’s iOS change made it harder to track user behavior on applications and websites. This made it difficult for brands to target advertisements and measure them on Facebook as well as Instagram. Tough competition was faced from applications like TikTok and YouTube which grabbed the younger population’s attention easily. Users have moved their focus towards Reels which generates less revenue, reducing the pace of revenue growth.

This gap created between Facebook’s investment and external changes leading to a weak revenue forecast is why the last quarter’s results spooked the investors.

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“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories.”, stated Meta’s CFO, Dave Wehner.  

“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories.”, stated Meta’s CFO, Dave Wehner.  

Google parent company Alphabet, on the other hand, reported a positive quarter despite the issues pertaining to the global supply chain and Apple’s change in policy. This policy change did not affect Google a lot as it collects its own data via search traffic and YouTube.

Facebook also announced that its stocks may start trading with the ‘META’ ticker in the first half of 2022.

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The Ripple Effect of Facebook

Since the COVID-19 crash, the Nasdaq, which is dominated by tech and other growth stocks, fell more than 9% in January, facing its worst monthly drop.

With Meta Shares witnessing a fall, other social media stocks like SNAP (Snap Inc.), TWTR (Twitter Inc.) and PINS (Pinterest Inc.) were also down. SNAP fell 17%, while Twitter and Pinterest were down by nearly 10% on Wednesday. These social media companies made a fast recovery the following day. After the announcement of strong quarterly reports, the stocks of Snap and Pinterest soared by 62% and 25%, respectively. Twitter jumped 10% and is going to report its quarterly report on 10th February 2022.

Facebook’s global daily active users also lowered from the previous quarter for the first time, from 1.930 billion to 1.929 billion.

This road block faced by Meta is because the results took the market by surprise. “I’m encouraged by the progress we made this past year in a number of important growth areas like Reels, commerce, and virtual reality, and we’ll continue investing in these and other key priorities in 2022 as we work towards building the metaverse,” CEO Mark Zuckerberg said in the earnings release.

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