Is Tik Tok killing Facebook?

Meta — the holding company controlling Facebook, WhatsApp, Instagram, and Oculus — lost a tremendous amount of value last week. The stock of Mark Zuckerberg’s company tanked 23 per cent during the trading session on Wednesday, ending below $250. The stock plunge was directly associated with the underwhelming quarterly results report presented earlier on. The massive drop cut nearly $200 billion in market value from Meta, sending its total market capitalisation from $900 billion all the way down to around $700 billion.

For the first time in a decade, Wall Street showed some serious doubts, and begun seeing some worrying vulnerabilities in what Meta is doing. The rise of Tik Tok is seen as the number one threat to Zuckerberg’s strategy.

Experts such as Jon Swartz, a Senior Reporter at MarketWatch, highlight how Facebook has lost major traction in the young audience, which migrated in flocks to the more engaging video-focused social networking service owned by Chinese company ByteDance Ltd. When Facebook was launched in 2004, the target audience was mostly consisting of young college students. But as the time went by, the average age increased significantly. Older Facebook users also mean higher vulnerability to scams and hacks, which in turn builds up more resistance against the platforms. For the first time, the net balance of Facebook users went down, instead of growing.

Another major issue linked to the ever changing privacy policy undermined Meta’s projected revenue. Apple implemented some recent changes that had a cascade effect on Facebook appeal for advertisers. According to Meta’s CFO, David Wehner, the change might cost the company a loss of income of about $10 billion in 2022. The rivalry between Apple and Facebook is known in the industry.

While Apple can generate income from multiple segments, including the very profitable sales of devices, Facebook’s income is 99 per cent generated by advertisement. As advertisers increasingly encounter more restrictions on how far they can track customers, slowly migrate to other possible avenues. Google being the number one alternative of choice. I found myself considering the option of dropping Facebook as a way to login into my music website, which I keep as a hobby, with no income generated whatsoever. Yet, in the past two months Facebook asked me to change my privacy policy 3 times.

But the elephant in the room is the large loss currently generated by the metaverse segment of Facebook, currently summing up to $3.3 billion. Having invested over $4 billion in this direction, as well as the rebranding to heavily emphasise the clear direction in which the company is planning to move in the future, placed a magnifying glass on the fact that the metaverse division might be in a loss for a very long time.

In one of the recent columns on the Oman Observer I have shared the story of a friend of mine, which uses the metaverse to hang out with friends. What I did not mention is that my friend is in her 40s, and work in a 6 digits job. For her, buying an Oculus device to join the metaverse is a trivial expenditure. But let us look at the market in general, joining Tik Tok to sing and dance is free of charge on any smart phone. Is Meta going to lose the social media battle?

stefano@virgilli.com

The writer is a member of the International Press Association