On October 28, 2021, Facebook changed its name to Meta. A change of name ultimately represented more than a simple modification of the company name since it then materialized the change of strategic course for the social network. A change of direction largely focused on web3 and the metaverse. But then, after 1 year, where is the American group led by Mark Zuckerberg?
Colossal investments that weaken the group?
As soon as the name change was announced, Mark Zuckerberg highlighted the extraordinary ambitions of his group. Ambitions are immediately supported by the figures presented. Because in addition to the change of name, the company then announced that it wanted to invest more than 10 billion dollars a year in the development of its metaverse.
Colossal investments have cringed among investors who bet on the group. A few days ago, during the publication of the company’s results, the CEO of Altimeter Group publicly questioned this investment strategy. Stating that it would probably take at least 10 years to reap the first fruits of these investments.
Brad Gerstner, whose company owns 0.11% of Meta shares, considers this investment, which could amount to more than 100 billion dollars, as uncertain in a future that he describes as uncertain. An investment that is all the more impressive/worrying (cross out the useless mention) as it comes at a critical moment for Meta. The third quarter report and poor numbers released saw the stock price drop almost 25% after the release.
If it is impossible to fully correlate this change of strategy to the evolution of the stock market price of l’action Meta, it has fallen by more than 70% over the last 12 months. A fall is even more marked than Bitcoin which, for its part, shows losses of around 60% over the same period.
But other variables such as the raising of key interest rates by central banks around the world in response to inflation also help explain Meta’s poor results. Compared to other tech companies, Meta still posted a clear underperformance over the period. For example, Microsoft only lost 30% capitalization.
Internal development and partnerships!
If the name change is only a symbolic step, Meta wanted to forge links with many players. Whether in the world of web3, digital assets, or NFT. In December 2021, Meta embarked on the project of exporting its social network to virtual reality. The firm has also paved the way for more crypto advertisements on its Facebook social network.
After the failure of the launch of Libra, Meta once again caused a stir by posting its intentions to launch its own digital currency. This is how in April appeared the Zuck Bucks project, a digital asset destined to be used within the metaverse. On this issue, it is difficult to know to what extent Meta has been able to progress. Last May, Meta also stood out following the filing of five trademarks for son service Meta Paya platform supporting digital assets.
Last month, Meta clarified that 2.9 billion users could embed their NFTs on Facebook and Instagram platforms. A feature that has been unlocked in more than 100 countries where social networks are available. Even more recently, the group has also partnered with Microsoft. A partnership that aims to build the virtual office of the future according to representatives of the two companies. By making the virtual reality headset developed by Meta compatible with Microsoft Office applications. In this way, many saw above all a way for Meta to develop its branch of professional customers.
If Meta is not idle, the results are not yet up to the sums invested. And sunk investments scare the markets. As Altimeter Group recently suggested, Meta’s investment policy now seems problematic to many investors. Coupled with the inability of the Facebook network to continue its development, this element could weaken the dominant position of the American giant.
If he recognized some shortcomings, Mark Zuckerberg has, it seems, no intention of changing course. As he recently acknowledged following the release of the group’s disappointing results when he commented on the metaverse his company wants to set up:
The metaverse platform obviously has a long way to go before it becomes what we aspire it to be.
On the all-out investment policy, Zuckerberg brushed the question aside. Noting that Meta was on the right track and that the company “should continue to invest heavily”. Because in addition to web3, Meta is also targeting other sectors such as artificial intelligence. If the future will tell us if the group was right, it is clear that Meta today crystallizes a lot of fears.