Market Revolts Against Zuckerberg’s Metaverse

Meta spent $25 billion on R&D this year but made $84 billion. The stock charts may seem dire, but they don’t tell the full story.

It felt like a Liz Truss moment. After Mark Zuckerberg pledged to keep sinking billions into an unproven metaverse, the market revolted last Wednesday. Meta stock dropped 20% and kept falling on Thursday. The company’s now down 71% this year. It’s lost more than $700 billion in market cap and Zuckerberg’s lost $100 billion of his personal fortune. Investors who counted on the company felt ignored, betrayed and pissed. Investment pro and media personality Jim Cramer nearly cried on air.

Nothing’s Holding Zuck Back

But Zuckerberg’s program — unlike that of the erstwhile British PM — is funded, backed by the proceeds of a profitable, high-margin ad business that won’t force him to quit. Despite revenue contracting somewhat, Meta made $27 billion in the third quarter and $5 billion in profit. It’s earned $84 billion this year and spent $25 billion on R&D. Zuckerberg, with a special class of voting shares, has total control of the company. He’s not going anywhere and can keep doubling down on the metaverse. It appears he will. 

“These are going to end up being very important investments for the future of our business,” Zuckerberg told analysts last Wednesday. “It’s some of the most historic work that we’re doing.”

Apple’s anti-tracking iOS changes are hampering Meta, delivering a $10 billion revenue hit this year, but they haven’t destroyed the business. The company’s on track to bring in around $110 billion this year, so Apple’s hit accounts for less than 10%. “They are overestimating the degree to which Apple is hurting Facebook,” Brian Wieser, global president for business intelligence at ad agency GroupM, said of investors. “Deceleration was inevitable, and that’s mostly what we are seeing.” 

Related Article: Facebook’s Rebranding Embraces the Metaverse, But Not Everyone Is Convinced

Will Recession Hurt Facebook’s Recruiting?

The biggest threat to Zuckerberg’s plans will be Meta’s declining share price restraining its ability to hire and retain employees. But with a recession imminent — one where jobs and solid compensation won’t be plentiful — joining a company that prints cash to work on something experimental will be attractive. If you’re interested in social media, there’s effectively nowhere else to go. Twitter will likely reduce head count under Elon Musk. Snap Inc. is contracting. TikTok’s not an attractive employer. If you’re really desperate, Pinterest just beat earnings estimates, but its market cap is lower than what Meta makes in two months.

Zuckerberg pivoting hard from a business so profitable it allows him to pivot may seem puzzling. But he clearly sees the writing on the wall. Young people no longer enjoy broadcasting on social media. They prefer messaging privately, often in groups. And they enjoy short-form video, often from people they don’t know. I asked a group of students last week if any had posted on Facebook within the past six months. None had. 

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