Meta’s Earnings Miss Hurts Wall Street More than Users

As an ongoing trend, Meta made headlines yet again, this time because of Meta’s earnings miss. However, the reality of the situation is that the ‘miss’ doesn’t affect day-to-day users, at least on a micro level. The miss primarily hurts Wall Street investors with deep investments in the multinational technology company.

Meta’s Earnings Miss Makes Headlines

For those trying to unpack Meta’ earnings miss, it primarily comes down to three factors: its saturated user base, failed cryptocurrency, and investments towards the metaverse. Despite these factors the problem isn’t as dire as headlines make it seem.

With the combined impact of these three factors, Meta’s earnings per share came out to $3.67, failing to reach the expected $3.84 mark.

Meta’s Saturated User Base

First, many investors blamed a shrinking user base for Meta’s earnings miss. Founded in 2004, Facebook enjoyed a wonderful run at the top of the social media world. Even last year, Facebook still claimed the number one spot at 2.895 billion users. YouTube held at the number two spot with 2.291 billion users. Despite this stranglehold over the social media space, the Facebook platform lost users this past quarter.

While investors anticipated 2.95 billion monthly users, Meta only hit 2.91 billion. In the world of Wall Street, this number caught investors off-guard. However, there are a few reasons to not be alarmed. One, Meta still oversaw a 4% year-over-year increase in user growth. An enormous number of variables could’ve led to the decline, anything from the coronavirus to the pandemic to temporary shifts.

That being said, the more logical reason comes from Facebook’s market share. As the world’s most popular social media platform Facebook is reaching a point of market saturation. The entire plant has a population of 7.753, and Facebook accumulated more than a third of that total. Plus, many countries throughout the world lack consistent technological infrastructure to support social media platforms, let alone the internet or other fundamental utilities.

Meta’s Failed Attempt at Cryptocurrency

With Mark Zuckerberg’s timeless motto of “move fast and break things”, Meta dove into the cryptocurrency market. The cryptocurrency project, known as Diem (formerly Libra), was designed to be Meta’s entry into the cryptocurrency market. Unfortunately, it wound up being yet another reason for Meta’s earnings miss.

Originally, Meta created Libra as a digital token, backed by other global currencies. However, United States regulators fought against that idea. Instead, Meta rebranded it as Diem, backed by the U.S. dollar. Despite the attempted rebrand, the U.S. Federal Reserve applied pressure to Meta’s banking partner, Silvergate. As a result, Diem’s progress completely halted.

Now, Diem CEO Stuart Levey announced a sale of Diem’s assets. In a press release, he stated, “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead.  As a result, the best path forward was to sell the Diem Group's assets, as we have done today to Silvergate.”

Meta ‘Goes Meta’

Fittingly enough, Facebook itself underwent a rebrand recently. After realizing the importance of the metaverse, Facebook rebranded to Meta at the end of October 2021. This marked the first step towards heavy investments into a futuristic metaverse, essentially a completely digital world. However, embarking on such an ambitious project also contributed to Meta’s earnings miss.

In 2021, Meta invested $10 billion into the metaverse. For reference, this number quintuples Facebook’s 2014 purchase of Oculus VR and decuples its 2010 purchase of Instagram. Ultimately, this investment led to a massive 8% decline in profits through Q4. But as the old saying goes, you have to spend money to make money.

Despite Meta’s initial investment, Wall Street anticipates the metaverse to be an $800 billion market by 2024. With a combined array of social media advertising, live entertainment, gaming, augmented reality, and virtual reality, the metaverse plans to employ much of what humans can accomplish today with the benefit of enhanced communication and personalization.

The Future Beyond Meta’s Earnings Miss

Despite Meta’s earnings miss, the future looks bright for the multinational technology conglomerate. Conclusively, Meta Platforms, Inc stock dropped from $323/share to $241.19 before plateauing. Overall, the declines largely didn’t occur due to a failing business model.

Since 2004, Facebook/Meta conquered the social media landscape, and still hasn’t relinquished its top spot. While Meta’s attempt at cryptocurrency faced insurmountable resistance from federal regulators, the promising future of the metaverse can open an entire new world of opportunity.

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