Value of Facebook and Instagram owners drops $65bn in value as profits halve

The market value of Meta, the company that owns Facebook and Instagram, has lost more than $65 billion after it said that third-quarter revenues had been cut in half as a result of advertisers cutting back on spending due to the worldwide economic crisis.

The 19% decline in Meta’s share price during after-hours trading reduced Mark Zuckerberg, the company’s chief executive, by an additional $10 billion in personal wealth. Zuckerberg created Facebook while he was a student.

Zuckerberg, Meta’s largest stakeholder and owner of the majority of the company’s stock, has already suffered a $70 billion decline in his net worth by September of this year.

Meta, the company that owns Facebook and WhatsApp, posted third-quarter revenue of $27.7 billion, which was higher than experts’ expectations despite a 4% decline in sales from the same period a year earlier.

It happened at the same time as the corporation, which has invested heavily in its virtual reality project, the metaverse, warned of impending weaker trading.

Due to firms cutting back on advertising spending, Meta is also suffering from the increased competition from TikTok.

The latest in a string of unimpressive earnings releases was Meta’s. The corporation has made significant investments in new items, but they haven’t yet paid off.

It follows the business’s $230 billion market value drop in February, which was the largest one-day loss in US corporation history as its shares fell by 26%.

As a result of investments made in the metaverse and its short-form video content offering Reels, Meta’s costs and expenses increased by 19% in the third quarter compared to the same period last year.

Its metaverse branch, Reality Labs, lost $3.7 billion over the last three months, and the corporation predicted that losses in 2023 would “increase considerably year over year.”

Investors expressed alarm over the losses, but Zuckerberg remained convinced that his investments in the metaverse and other “experimental bets” would start to pay off.

These will ultimately turn out to be really significant investments for the future of our company, according to Zuckerberg.

“We’re working on some of the most historic projects right now. Many years from now, people will reflect on this and discuss how important the work done here was.

The fundamentals are in place for a return to better revenue growth, he continued, “even though we confront near-term headwinds on revenue.”

Fears of a recession and rising inflation have hurt Meta and other digital companies. Microsoft and Alphabet, the parent firm of Google, have also let investors down with their third-quarter results.

Additionally, Meta has suffered with Apple privacy policy changes that were implemented in 2021 and undermined its major advertising model, which the business said would cost it $10 billion in anticipated 2022 advertising income.

According to Sir Martin Sorrell, head of the digital advertising firm S4 Capital, separating Facebook’s business from its metaverse initiative may be one method to raise the stock price of the company.

If you’re able to separate Facebook and Instagram from Reality Labs, where the investment in the metaverse is being made,… The market outcome may be substantially different if the two businesses were split, and the value of Facebook platforms would likely increase, Sorrell said on BBC Radio 4’s Today program.

After first declaring a staff hiring freeze and prospective restructuring in September, Meta made a suggestion about job losses.

According to the business, it would “keep some teams stable in terms of manpower, decrease others, and fund headcount growth solely in our highest priorities.”

“As a result,” it continued, “we expect personnel to be about in line with third quarter 2022 levels by the end of 2023.”

Additionally, Meta has projected a decline in sales for the year, its first since becoming public in 2012.

According to Debra Aho Williamson, an analyst with Insider Intelligence, Meta’s third-quarter losses showed that it had concentrated too heavily on new endeavours.

When it comes to the current situation of its business, Meta is “on wobbly legs,” she declared. “Meta has to restructure its operations in order to resume stronger growth. It would gain from placing less emphasis on the metaverse and more on repairing its fundamental operations.

Leave a Comment