Is Meta Poised for a Comeback?
Meta has had a rough time as of late but don’t write the company off completely.
Even though it’s one of the top tech companies in the world, Meta has not had an easy year. Meta CEO Mark Zuckerberg said, back in September, that company staff would have to be reduced due to the company’s recent economic struggles. He also said Meta would probably be downsized in general by next year. In making the move, he was not alone, as Twitter fired thousands of its employees at the start of November after Elon Musk’s takeover, and similar decisions were reached at hard drive maker Seagate Technology Holdings and Lyft, the ride-hailing company.
However, there’s something that distinguishes Meta’s fall from grace from those of other big names in the tech sector. It’s not only the sheer size of the losses, with shares down over 70% by the beginning of November, it’s also the damaging accusations they’ve faced about the human and political impact of Meta-owned properties Facebook and Instagram. Max Willens of Insider Intelligence explains that Meta is “using [the general economic downturn] as a way to hide the reality that Apple is probably doing the most damage and is putting the tightest squeeze on business at the moment.”
If you’ve got plans to trade Meta shares as CFDs, or if you’re simply interested in the tech sector, join us for an explanation of Willems’ point and a general roundup of the headwinds Meta will be battling in the future.
Advertisers were always drawn to Meta because of its power to channel adverts to just the right customers through Instagram and Facebook. In 2021, Apple took a step to protect its customers’ privacy, so targeting ads on iOS devices was partially stopped. Advertisers then found they would have to pay more money for more numerous, less targeted ads. Apple also hampered digital advertisers from figuring out the impact of their ads, which they use to funnel funds in the right direction. It now seemed to them that what Meta had to offer was less irreplaceable. Understandably, Meta was upset, and complained that Apple was “undercutting others in the digital economy.”
In February, Meta said these new developments would drain $10 billion from their revenue for the year. The effects later seemed clear to see: Q3 revenue was down 4.5% from the same quarter a year ago, contrasting with Alphabet’s gains of 6% and the jump of over 5% recorded by Pinterest and Snap.
Another slap in the face came in September when two Meta customers sued the company in a San Francisco court for circumventing Apple’s safeguards. Felix Krause, a data privacy researcher, said Meta’s apps introduce JavaScript code into websites that gives Meta the power to track “anything you do on any website,” even typing passwords.
Zuckerberg, keeping his eye on the future, has been spending huge amounts of money on developing the metaverse, however not always to the delight of shareholders. “They are really taking on a massive science project – it’s essentially the Manhattan Project,” says Kamran Ansari of Greycroft Partners. The large expenditures have been coming at a time when revenue from social media has been slackening, so the pressure on Zuckerberg has built up. Aside from the headaches caused by Apple, Meta has also had to weigh up the obstacle of increased competition from the likes of TikTok, who are commanding a bigger portion of the market.
Reality Labs, which is Meta’s virtual reality segment, contributed less than 2% of company revenue for Q3, and this fell shy of analysts’ estimates. Most of that revenue came in through headset sales, and Zuckerberg doesn’t hide the fact that Reality Labs will take several years to produce fruit.
Meta has been using its strengths in using artificial intelligence to track the users who see its ads, and also to enhance the user experience on its social media platforms. Yet here may be signs that Meta has made some progress in getting back on the horse since Apple’s policies landed. In their immediate aftermath, the portion of advertising budgets that went their way slid from 32% to 24%, but, six months later, it was up to 28%.
One thing we know from the CEO is that the company will have to be “leaner and more efficient” in 2023. In October they closed one of their New York offices. “We are working to ensure we’re making focused, balanced investments to support our most strategic long-term priorities,” explained Meta spokesman Jamila Reeves.
Here’s where the shares trading info really hits, which is important fodder for those who trade CFDs. When the company’s layoffs began in November, shares went up 3.8% to $94.20. They hoped to gain between $3 billion and $4 billion from the job cuts. There is sure to be plenty in the news about Meta and their battle to position themselves to regain dominance in their market, which is always useful to read if you’re trading their shares as CFDs. Trading any kind of tech shares as CFDs requires regular reading of such news articles to ensure you’re making up-to-date, informed trading decisions.
