Facebook At Risk Of Complete Collapse?
Facebook stock is trading at its lowest point in two years, and the company experienced significant decreases in revenue due to its inability to leverage targeted ads on Apple's platforms.
This article is more than 2 years old
This year is just not Facebook’s year. The social media giant has faced mounting troubles for months now. And with the latest news out of Wall Street, Facebook’s downward spiral is rapidly accelerating.
For many years, Facebook was the poster child of success. The company was doing so well back at the beginning of 2021. Their financial success was beyond impressive, and they boasted a market cap of $1 trillion.
Few US companies have ever achieved that status in the market. Then everything changed. Shortly after reaching that pinnacle of success, Facebook changed its name to Meta.
There are no direct ties between the name change itself and the subsequent problems Facebook has had. But the shift in luck after the company rebranded is undeniable. Unfortunately, the latest financial news suggests the run of bad luck won’t be changing any time soon.
Facebook’s stock is now trading at the lowest point in over two years. When it closes the third quarter this year with double-digit losses (in percentage points), the company will have lost nearly two-thirds of its value since its peak a year ago.
The situation is so dire Facebook now sits in the bottom five companies in the S&P 500. Investors are dumping stock rapidly, possibly due to the new direction CEO Mark Zuckerberg is taking the company. The rate at which investors are jumping ship suggests a lack of confidence in the upcoming metaverse Zuckerberg is building.
He is investing billions of dollars into a project that has minimal return at the moment. While Zuckerberg hopes to have the metaverse up and running in ten years, it does little to help add to Facebook’s existing revenue woes. However, according to CNBC, the company is still doing well financially.
Revenue statements from the most recent quarter highlight $40 billion in marketable securities and cash, along with a profit of $6.7 billion. That’s no small number and definitely offers some wiggle room while the metaverse is in development. But the massive amounts of money pumped into the project isn’t the only reason Facebook is facing revenue trouble.
Users are increasingly leaving Facebook for greener social media pastures. Based on data obtained by CNBC, the company has lost roughly 1 million users in the US and Canada. And the marketing dollars are going with them.
Advertising revenue took an additional hit when Apple announced news of its updated privacy policy in 2021. The new iOS update, App Tracking Transparency, requires app developers to request permission from users before tracking their data. The intent was to halt unwanted targeted ads.
And without the ability to develop targeted ads for its users, Facebook took a tremendous financial blow. The loss of ad revenue amounts to an estimated $10 billion this year alone. This hit has left the company scrambling.
They’ve begun pushing even harder on metaverse development in the hopes the virtual world will host billions of online transactions. And they made significant adjustments to the Facebook app. One of the biggest shifts was introducing a feature called Reels.
They designed Reels to mirror TikTok and hopefully bring younger users into the Facebook fold. However, it launched to mixed reviews. Time will tell whether the efforts will pay off or if Facebook will continue to face an uncertain financial future.
