Topline
Shares of Facebook’s parent firm Meta were down nearly 20% in pre-market trading, continuing a slide Thursday after the company’s third quarter earnings released a day earlier fell short of expectations.
Meta CEO Mark Zuckerberg doubled down on the company’s metaverse push amid skepticism from … [+]
Key Facts
Early on Thursday morning, Meta’s shares were trading at around $103, down from $129 when markets closed on Wednesday afternoon.
The social media giant reported quarterly revenue of $27.7 billion—down more than 4% year-on-year—its second consecutive quarter of revenue decline.
Meta’s Reality Labs division, which is leading the company’s pivot towards building a metaverse, reported a $3.7 billion loss in the third quarter, bringing its total losses so far this year to $9.4 billion.
In its press release, the company also warned it anticipates Reality Labs’ operating losses to “grow significantly” in 2023.
Despite the steep losses, Meta CEO Mark Zuckerberg doubled down on the company’s metaverse push during the earnings call, saying “people are going to look back on decades from now and talk about the importance of the work that was done here.”
News Peg
Meta has seen its shares slump by more than 60% since the start of this year as part of a broader tech stock rout amid concerns about an economic downturn. Facebook, however, has fared worse than nearly all major tech stocks as it deals with slowing user growth, competition from rivals like TikTok and the impact of Apple’s new privacy measures for iPhone users on its targeted advertising business.
Key Background
The company’s expensive metaverse push—in which it is trying to build an immersive virtual reality world which will allow people to interact with each other—has drawn some skepticism in recent months as its advertising revenues face economic headwinds. Earlier this month, the Wall Street Journal reported that Horizon Worlds was struggling to retain its user base despite being pushed heavily by the company. The report noted that the company had set a target of 500,000 monthly active users for the virtual reality platform by the end of 2022, but this was revised down to 280,000. At present, the company reportedly has less than 200,000 active users on Horizon with an internal document calling it an “empty world is a sad world.” In comparison, Meta’s flagship social platform Facebook has 2.96 billion monthly active users, while Instagram user base has also grown to 2 billion, the company disclosed in its earnings call. Meta’s messaging app WhatsApp is used by 2 billion people every day.
Tangent
In August, Zuckerberg shared a photo of his digital avatar with 3D renders of the Eiffel Tower and Barcelona’s La Sagrada Familia church in the background to celebrate the launch of ‘Horizon Worlds’—the company’s flagship metaverse product—in France and Spain. The image immediately became a subject of memes and internet jokes as people online made fun of the poor visual quality of the metaverse by comparing it to video games from the early 2000s. Zuckerberg addressed this in Wednesday’s earnings call, saying: “Sometimes when we ship a product, there is a meme where people say, ‘Hey, you are spending all this money, and you have produced this thing,’ and it’s – I think that, that’s not really the right way to think about it.” The Meta CEO added consumers are presently seeing the company’s “leading work” on what will become a mature product in five to ten years’ time.
Further Reading
Meta Stock Crash Steepens As Facebook Parent Grapples With Recession Fears (Forbes)
Source: https://www.forbes.com/sites/siladityaray/2022/10/27/meta-shares-plummet-20-in-pre-market-after-q3-revenue-decline/