As CNBC notes in a recent story on Facebook’s—erm, Meta’s—travails, the company’s market cap, which was $1 trillion at this time last year, has since shrunk by two-thirds, and the stock is at its lowest point since January 2019. In fact, the stock has been the fifth-worst performer on the S&P 500 index this year.
Facebook’s business was built on network effects — users brought their friends and family members, who told their colleagues, who invited their buddies. Suddenly everyone was convening in one place. Advertisers followed, and the company’s ensuing profits — and they were plentiful — provided the capital to recruit the best and brightest engineers to keep the cycle going.
But in 2022, the cycle has reversed. Users are jumping ship and advertisers are reducing their spending, leaving Meta poised to report its second straight drop in quarterly revenue. Businesses are removing Facebook’s once-ubiquitous social login button from their websites. Recruiting is an emerging challenge, especially as founder and CEO Mark Zuckerberg spends much of his time proselytizing the metaverse, which may be the company’s future but accounts for virtually none of its near-term revenue and is costing billions of dollars a year to build.
While Facebook appears to be at an inflection point that could presage either continued good fortune or an eventual trip to the Big Tech boneyard, the company’s recent reversal of fortune actually has some analysts predicting a Meta stock “death spiral.”
“I’m not sure there’s a core business that works anymore at Facebook,” said Laura Martin, a senior analyst at the asset management firm Needham. Granted, Martin is the only analyst among 45 tracked by FactSet who’s attached a “sell” rating to the stock, but such a dire outlook must seem strange to observers who’ve witnessed years of robust growth.
In fact, signups may have peaked, with the number of active users in the U.S. and Canada actually falling in the past two years, from 198 million to 197 million. The platform is being pressured by competition from younger-skewing apps like TikTok, and it’s looking increasingly like baby boomers sharing Comic Sans-embroidered memes about drinking straight from garden hoses is not the business model of the future.
“I don’t see it spiraling in terms of cash flows in the next few years, but I’m just worried that they’re not winning the next generation,” Jeremy Bondy, CEO of app marketing firm Liftoff, told CNBC.
Meanwhile, Facebook is attempting to staunch the bleeding with a short-video add-on called Reels, which is intended to compete directly with the surging TikTok, though the company has acknowledged difficulties in monetizing the feature. But it’s a shift in focus that appears to smack of desperation.
“[Zuckerberg] wouldn’t be hurting its revenue at the same time he needs more money, unless he felt like the core business wasn’t strong enough to stand alone,” said Martin, the Needham stock analyst. “He must feel he has to try to move his viewership to Reels to compete with TikTok.”
Of course, one reason Facebook’s fortunes may look less bright than they used to is the considerable stigma the company carries. Haugen’s testimony was something close to seismic, and it blew the lid off the company’s outsized greed and cynicism.
Facebook’s role in getting Donald Trump elected in 2016 was bad enough, but according to Haugen, the company as a rule has observed few ethical guardrails.
In her October 2021 congressional testimony, Haugen detailed the company’s perverse greed as well as the harm it knowingly caused to the world’s democracies and some of its most vulnerable citizens.
“During my time at Facebook … I saw that Facebook repeatedly encountered conflicts between its own profits and our safety,” Haugen said. “Facebook consistently resolved those conflicts in favor of its own profits. The result has been a system that amplifies division, extremism, and polarization—and undermining societies around the world. In some cases, this dangerous online talk has led to actual violence that harms and even kills people. In other cases, their profit-optimizing machine is generating self-harm and self-hate—especially for vulnerable groups, like teenage girls. These problems have been confirmed repeatedly by Facebook’s own internal research.”
Of course, Facebook’s stock could still rise from here. It’s not like it’s Truth Social, the core business model of which appears to be tricking Marjorie Taylor Greene into giving them all her money. For example, in the mid-‘90s, Apple’s stock was in a ditch and people openly wondered if the company would survive. We all know what’s happened since. On the other hand, when was the last time you checked your MySpace?
If Facebook does eventually die, few of us will mourn. And after what the company has done to democracy, it would look a lot like a mercy killing.
Mercy for everyone but its investors, anyway.
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I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.