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For Facebook, things have gone from bad to worse, said Edward Ongweso in Vice, and it's "imploding before our eyes." The much-hyped pivot to the "metaverse" — complete with a name change to Meta — has turned into a disaster. Last week, Meta chief executive Mark Zuckerberg said the company lost $9.4 billion just in the most recent quarter, while he was building out his "soulless" vision of a virtual world. "Zuckerberg's obsession with the metaverse is one major problem, but there are fundamental issues plaguing the company's core business," Facebook, Instagram, and WhatsApp, as well. "Facebook's revenue has declined for two consecutive quarters," and by many metrics, it "is getting its ass kicked by TikTok." Meta's stock plunged another 24 percent last week and is down about 70 percent on the year. Just 16 months ago, Facebook was among the five most valuable companies in the U.S. It has since shed nearly $800 billion in value.
The metaverse sounded like a bold bet a year ago, said Rachel Metz and Clare Duffy at CNN. Now, it sounds "borderline unhinged." The pace of spending on the project is outrageous "even by Silicon Valley standards," and it's still "not clear whether consumers actually want to work or play in it." But Zuckerberg has positioned it "as a sort of existential imperative for the company," which doesn't want to have to rely on an app store to survive. Zuckerberg is increasingly seen as "an obstacle to the stock's recovery," said Ryan Vlastelica in Bloomberg. Yet the company's structure leaves shareholders with little influence over his actions. "Zuckerberg owns or controls about 90 percent of the company's unlisted Class B shares, which have 10 votes versus one vote each" for publicly traded Class A shares. However, Zuckerberg's huge stake means he has lost $100 billion in 13 months.
Just don't dance on Facebook's grave yet, said Ben Thompson in Stratechery. Facebook is not losing to TikTok nearly as badly as the critics would have it. Its short-video feature Reels is growing rapidly, and while it may not "be surpassing TikTok anytime soon," that undermines the narrative that TikTok is dominating. Meanwhile, Facebook "is still adding users: The company is up to 2.93 billion Daily Active Users," a bump of 50 million in the past three months. The metaverse "may be a speculative boondoggle, but that doesn't change the fact that the old Facebook is still a massive business," and a lot of Meta's indicators are still pointing upward.
Actually, the indicators for all of Big Tech may be pointing down, said Richard Waters in the Financial Times, and Meta's troubles are a "warning" to the industry. "Growth in digital advertising, e-commerce, and cloud computing has slowed more than expected as economic conditions worsen," dealing hits to "the profit margins of some of the most profitable groups on the planet," such as Google, Microsoft, and Amazon. Though their mistakes may not be as high-profile as Zuckerberg's, all of them are still taking a big risk, spending mightily in the belief they are "on the cusp of a new era of growth."
This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.