Meta announces another drop in revenue
AILSA CHANG, HOST:
Facebook parent company Meta has hit a serious rough patch. So far this year, it has lost half a trillion dollars in market value. And today, its stock continued to crater.
NPR tech reporter Bobby Allyn joins us now to explain why Meta is being battered and what it means to the broader economy. Hey, Bobby.
BOBBY ALLYN, BYLINE: Hey, Ailsa.
CHANG: So it seemed like for a long time Big Tech companies like Meta never seemed to stop growing. Like, every quarter meant bigger profits, a more valuable company. What changed here?
ALLYN: Yeah. Well, quite a bit actually. And there's both big-picture things that have changed and some things that are particular to Meta. Zooming out a bit, remember how Meta makes money - advertising, right? About 98% of its revenue comes from ads. And the landscape for digital advertising is really shaky right now. Fears of a recession and the war in Ukraine has meant companies are pulling back out of caution. Also not helping social media apps like Facebook is that Apple has made some changes that makes it a lot harder for companies to target people with personal ads.
CHANG: OK, so some larger changes. But you mentioned that there are some things dragging Meta down that are unique to the company. What are they?
ALLYN: First one, TikTok. It remains a huge global success. We all know it. It's really giving Meta a run for its money. TikTok has forced Instagram and Facebook to double down on in-app videos, but, you know, in the world of short, viral videos, TikTok is still king. Another huge factor is, well, the whole Meta thing.
CHANG: What do you mean?
ALLYN: The company changed its name last year to reflect a pivot to the metaverse, you know, this kind of virtual reality where CEO Mark Zuckerberg says everyone will eventually be living and working one day.
CHANG: Right. And how is that going?
ALLYN: How is it going? Poorly (laughter).
CHANG: Yeah. Yeah.
ALLYN: Meta, you know, they're building a team of some 10,000 people to create its version of the metaverse. It's promoting its $1,500 virtual reality headset. How exciting. But, you know, people are just not following, Ailsa. I mean, the effort is gobbling up billions of dollars. And Zuckerberg says, OK, everyone; cool your jets. This is a long-term vision. It's going to take many years to catch on. But investors are just getting frustrated. The Wall Street Journal obtained documents that showed that Meta's flagship virtual reality game, Verizon Worlds (ph), has very few users. The report found that Meta's own employees are not using metaverse products.
ALLYN: So yeah, that's a little embarrassing. But in all, the whole metaverse thing is an unproven idea, and it's just burning an incredible amount of cash right now.
CHANG: OK. So obviously hard times for Meta, which means, you know, not a great time for a Meta shareholder right now. But how much does any of this matter to, say, like, someone who doesn't hold Meta stock?
ALLYN: Yeah. Well, Silicon Valley giants, including Meta, drive the stock market. For instance, you know, more than a quarter of the S&P 500's value is from tech stocks. And so when tech declines, the market starts hurting. And that can have far-reaching effects into our pocketbooks. It can lead to borrowing costs going up for companies and products eventually getting more expensive. It could put a dent in retirement savings. It could impact how people feel about stocks - tech stocks or stocks in general. And that could have a contagion effect. There are all kinds of ways in which bad economic fortunes for Meta can be bad for everyone.
Now, part of Mark Zuckerberg's job is to be optimistic, so he mentioned the good news yesterday that on Instagram and WhatsApp, the user base is actually growing. And he told investors he appreciates their patience with the metaverse because, at least Mark Zuckerberg thinks, those who are patient will end up being rewarded.
CHANG: Patience. That is NPR's Bobby Allyn. Thank you so much, Bobby.
ALLYN: Thanks, Ailsa. Transcript provided by NPR, Copyright NPR.