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As Facebook fades, Meta hopes for success in another dimension
I
t is night-time at the Soapstone Comedy Club. In fact, it always is. The club is a space in Horizon Worlds, Meta’s flagship metaverse app, where users can watch and perform comedy in virtual reality (vr). “It’s hard to do stand-up when you have no legs,” quips one performer, gesturing to his hovering avatar, before accidentally dropping the virtual microphone and floating offstage. A night out in vr lacks some of the atmosphere of a real bar, though it does cause authentic dizziness and nausea.It is almost a year since Mark Zuckerberg announced that his company would change its name from Facebook to Meta, to reflect its commitment to the metaverse and, no doubt, to escape the firm’s toxic public image. Many were unsure what the word meant, but with the company’s value at a near-all-time high of $1.1trn, and its core social-network advertising business humming away on the back of a pandemic boom, investors were willing to indulge the experiment.
A year on, things look different. The metaverse on which so much has been staked remains unproven and unpopular. On October 16th the Wall Street Journal reported that, according to internal Meta documents, user numbers had declined since the spring. Meanwhile there are signs that both users and advertisers are drifting away from the social networks that pay Meta’s bills. Since its rebranding the company’s share price has dropped by 60%, destroying more than half a trillion dollars of market value (see chart 1). Forecasts for profits in 2023 have fallen by about 50%, according to data from Bloomberg. Meta’s next earnings results, due on October 26th, represent an “existential quarter”, says Mark Shmulik of Bernstein, a broker.
What has gone wrong? The sell-off of Meta stock began in February, after the company reported its first-ever drop in daily users of Facebook, its first and largest social network. After 18 years of uninterrupted growth it lost 1m of them between January and March (see chart 2). It has since bounced back, adding 39m more, while users of Meta’s “family of apps”, which includes Instagram and WhatsApp, have kept growing.
But the new users increasingly come...