Shares of Facebook parent firm Meta plunged 26% on Thursday, 3 February 2022, wiping out about US$251.3 billion (S$337.8 billion) in market value as the social media giant posted disappointing earnings. This is now the biggest one-day plunge in the history of both the stock market and Facebook.
Meta cited Apple’s recent privacy changes to its operating system, which limits its ability to track the activities of iPhone users, along with supply-chain disruptions as the main causes for the crash.
Analysts, however, think that competition in the social media space was also a huge factor. Facebook and Instagram now have to compete with their rivals for their users’ attention, and trends are reportedly favouring the likes of TikTok, with user engagement shifting towards short-form video posts. Meta’s answer to this comes in the form of Instagram Reels, a feature that lets users record and share short-form clips. While the feature is able to attract users, it’s less profitable for Instagram and Meta as a whole when compared to its other offerings.
Facebook additionally reported that, for the first time ever, the platform’s daily global user count saw a decline, dropping from 1.93 billion the previous quarter to 1.929 billion. This once again suggests that other social media platforms are heating up the competition. In contrast, forecasts point to TikTok continuing to grow its user base this year, after crossing the 1 billion mark last September. And it could soon have daily user counts that could rival Facebook and Instagram.
Although Meta’s shares will likely recover in the coming days, these relatively big plunges paint a bad picture in the eyes of investors, as The Straits Times notes. Then again, this isn’t the first time Facebook has suffered from such a plunge. Stocks similarly dropped in July 2018, slashing about US$120 billion off of the firm’s market capitalisation.
Also worth noting, Facebook earlier this week announced that it was no longer moving ahead with its stablecoin project, Diem, as it finalises the sale of its intellectual property to the Silvergate investment firm for US$182 million. Diem Network CEO Stuart Levey said that despite the project making progress, dialogue with federal regulators fell through.
Facebook first unveiled its cryptocurrency ambitions in 2019 under the name Libra, touting that it would help the under-served gain access to a financial network powered by blockchain.
The social media firm pitched the initiative as a digital currency that can be used as payment in businesses that support it. The catch is that it’s not fully decentralised like conventional blockchain-based cryptocurrency. Instead, Facebook hands control to a consortium of financial partners, including PayPal, MasterCard and Visa, among others, with it maintaining a leadership role. But with Facebook’s damaged reputation in privacy and growing scepticism of the project, its partners would later defect, forcing operations to be scaled back.
Meta's shares plunged 26%, wiping out about US$251.3 billion (S$337.8 billion) in market value as the social media giant posted disappointing earnings.
The firm blamed Apple’s recent privacy changes and supply-chain disruptions for the plunge, but analysts believe that competition in the social media space was also a factor.
Facebook earlier this week also announced that it's shuttering its stablecoin project, Diem, and selling off its assets to the Silvergate investment firm for US$182 million.