When Facebook rebranded as Meta most people thought that Mark had everything figured out. The metaverse, an idea that he and a lot of other ‘visionaries’ had been floating around for years had finally come to fruition.
With the rebrand and more companies following suit, one might think that the metaverse is truly here. Today there are even stories of people buying real estate in the metaverse, managers holding meetings in the metaverse and some are even getting married in this virtual world.
Come 2022 however and Meta’s financial woes are revealing one thing; the metaverse is not yet here and possibly won’t be for the foreseeable future.
Now I had talked about the metaverse hype late last year but even I couldn’t have foreseen how fast investors would be able to see through the hype and see Meta for what it really was: a hype train for a technology that is yet to be truly built.
Over the last few days, Meta has been losing a lot of money, and by a lot, I mean billions, $250 billion to be exact. This was all in one day, definitely its worst, Facebook’s parent company just lost 26% of its value.
Mark Zuckerberg pointed to the rising popularity and thus competition from the newest social media juggernaut, TikTok.
“People have a lot of choices for how they want to spend their time, and apps like TikTok are growing very quickly,” he told investors on Wednesday. “The thing that is somewhat unique here is that TikTok is so big as a competitor already and also continues to grow at quite a fast rate.”
And he is quite right about that. TikTok isn’t just threatening Facebook it is also sucking customers from Instagram and thus drawing billions of dollars worth of advertising revenue that is the heart of Meta’s business model.
So good and popular is TikTok right now that Meta is trying very hard to catch up by copying some of its features into Instagram with reels.
“The threat is so large that Facebook is being forced to change its products to replicate TikTok, because TikTok is what clearly consumers now want,” said Rich Greenfield, an analyst at LightShed Partners. He said Meta’s plunging share price reflected “the fear that TikTok has reached escape velocity.”
But this is not a new phenomenon, TikTok has been winning the advertisement battle for about a year now and I think Mark Zuckerberg realised that he couldn’t win it, TikTok was just too ahead of them. The solution? the metaverse.
Meta, is not only a futuristic vision for Mark but a way to survive after losing to a competitor. And this is not where my criticism lies. Lots of successful entrepreneurs successfully pivoted to different industries. The best example is Cornelius Vanderbilt.
My criticism lies in overselling its efficacy and stage of development. Zuckerberg and lots of other ‘metaverse’ companies are selling technology that is years away from fruition. And, they are losing lots of money doing it. “Meta said it lost $10 billion last year on its Reality Labs division, which designs and builds the software and virtual reality hardware, such as the Quest 2, that will be used in the metaverse.”
Zuckerberg himself admitted as much.
“This fully realized vision is still a ways off,” he said. “And although the direction is clear, our path ahead is not perfectly defined.”
Normally, with tech companies, investors understand that time is a factor. Most of them, the successful ones, at least, stick with the companies through thick and thin in the hope of reaping the returns a decade or fifteen years down the line. That was the case with Amazon, Netflix and even Facebook in its earlier days.
Now, however, it seems, investors are not sticking around for the ride. Is it a crisis of faith? I think not. It’s more of a lack of direction as Lightshed’s Greenfield points out.
“Investors can handle bad news, investors can handle good news,” he said. “What investors hate is lack of visibility.”
When there is no clear direction from the CEO as to the efficacy of the project and where they would be going investors are not willing to ride the train. And this is why Meta is going to lose more. My advice; show us what you really got and maybe we can believe in you.