Meta's tumble in share price on Thursday was the market's reaction to news that a slowdown in digital advertising, new security protocols on Apple devices and a bet on the metaverse have all hurt the Facebook parent's bottom line. In particular, investors have criticized Meta CEO Mark Zuckerberg, seen here, for spending big on the metaverse. Michael Nagle/Bloomberg via Getty Images hide caption
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Michael Nagle/Bloomberg via Getty Images
Meta's tumble in share price on Thursday was the market's reaction to news that a slowdown in digital advertising, new security protocols on Apple devices and a bet on the metaverse have all hurt the Facebook parent's bottom line. In particular, investors have criticized Meta CEO Mark Zuckerberg, seen here, for spending big on the metaverse.
Michael Nagle/Bloomberg via Getty Images
Facebook parent company Meta's stock plummeted on Thursday, following its announcement of a dismal third quarter.
At market close on Thursday, shares in the tech company had fallen nearly 25%, selling for under $98 apiece, a level not seen since 2016.
So far this year, Meta's stock has fallen by about 70%. It's now worth around $270 billion, roughly a third of its market capitalization of just under $900 billion a year ago.
The markets are reacting to news that a slowdown in digital advertising, new security protocols on Apple devices and a bet on the metaverse have all hurt Meta's bottom line. Revenue fell 4% in the three months from July through September when compared with a year earlier, from $29 billion to $27.7 billion, the company said Wednesday.
A strong U.S. dollar also has been bad for global companies like Meta. Headquartered in the United States, their products and services, which are going for less in other currencies, are turning a smaller profit back home.
It has been a particularly bad week for tech.
Google parent Alphabet, which reported earnings Tuesday, also struggled amid a downturn in digital ads. Revenue from Google advertising was $54.5 billion in the three months from July to September, down from $56.3 billion the prior quarter.
Microsoft reported the slowest growth it has seen in five years.
But Meta's woes are deeper than its fellow tech titans' because it is investing heavily in a future called the metaverse — a new space built around virtual reality and artificial intelligence.
"I think that our work here is going to be of historic importance and create the foundation for an entirely new way that we will interact with each other and blend technology into our lives," Zuckerberg said on a call with investors Wednesday.
While Zuckerberg has signaled layoffs across most teams to counter losses, the CEO said hiring would increase in other "high priority" areas — namely to build up the metaverse.
Investors have criticized Zuckerberg for spending big on an idea that isn't fully fleshed out despite his optimism in his investment.
"The tougher prioritization and discipline and efficiency that we're driving across the organization will help us navigate the current environment," he told investors on the call.
More Meta shareholders sold off stocks during the day Thursday.
Last week, Snap shares plummeted 30% after the social media company, which is smaller than giants Meta and Alphabet, missed revenue estimates.
As an expert in technology, business, and financial markets, I've closely followed the recent developments surrounding Meta, the parent company of Facebook. My extensive knowledge is backed by a keen understanding of the factors influencing the tech industry, particularly in the areas of digital advertising, security protocols, and emerging technologies like the metaverse.
The article highlights Meta's significant decline in stock price following a disappointing third quarter, with shares plummeting by nearly 25% and the company's overall value dropping by about 70% in the year. The market reaction is attributed to several key factors, each of which I can elaborate on:
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Slowdown in Digital Advertising: The report mentions a slowdown in digital advertising as one of the contributing factors to Meta's poor performance. Digital advertising is a crucial revenue stream for tech companies, and any disruption or decline in this sector can have a profound impact on their financial health. Meta's reliance on advertising revenue makes it vulnerable to shifts in this market.
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New Security Protocols on Apple Devices: The article points out that new security protocols on Apple devices have negatively affected Meta. This likely refers to Apple's ongoing efforts to enhance user privacy and limit tracking across its devices, which can limit the effectiveness of targeted advertising, impacting platforms like Meta that heavily depend on user data for ad personalization.
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Bet on the Metaverse: One of the major reasons behind Meta's struggles is its ambitious investment in the metaverse. The metaverse is a futuristic concept that involves creating immersive virtual spaces using technologies like virtual reality and artificial intelligence. While Meta's CEO, Mark Zuckerberg, sees this as a groundbreaking development with historic importance, investors have criticized the company for allocating substantial resources to an idea that has yet to fully materialize.
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Financial Performance and Global Challenges: Meta's financial woes are further compounded by a 4% decline in revenue from July to September compared to the previous year. Additionally, the impact of a strong U.S. dollar on global companies is highlighted, affecting the profitability of Meta's products and services in other currencies.
In contrast to Meta, other tech giants like Google (Alphabet) and Microsoft are also facing challenges, but Meta's situation is deemed more precarious due to its significant investment in the metaverse. While the CEO acknowledges the need for discipline and efficiency in navigating the current environment, critics argue that the company's optimistic outlook on the metaverse may not align with the current market sentiments.
The broader tech landscape is experiencing a challenging period, with various companies grappling with issues related to digital advertising, revenue growth, and adapting to evolving technologies. The interconnected challenges faced by Meta reflect the dynamic nature of the tech industry and the importance of strategic decision-making in navigating its complexities.
