Facebook Parent Meta’s Stock Continues To Freefall

Meta went down in history last Thursday for the biggest single-day loss in the stock market. Meta (the company previously known as Facebook) stock continued to plummet yesterday adding another 5% to what is now a 27% drop in the last week. After losing more than $230 billion of it’s market value last week, Meta’s market valuation is now less than one quarter of Apple’s $2.8 trillion market cap.

The company said Apple’s iPhone privacy changes, which impact its ad-targeting and measuring, would result in a $10 billion revenue hit this year. It also said macroeconomic challenges like inflation and supply chain disruptions, are weighing on advertiser budgets.

Last year, we talked about this when Apple first introduced App Tracking Transparency, allowing iPhone and iPad users to opt out of having apps share or track their activity. The New York Times says the “vast majority” of iPhone owners have chosen to utilize the feature and block tracking.

So what does this mean?
User growth on its flagship platform, Facebook, was stagnant at 2.91 million monthly active users, compared to 2.9 million users reported the previous quarter — representing only an increase of 4% year-over-year. For the first time in its history, Facebook reported a loss in daily average users, dropping from 1.93 billion in the third quarter of 2021 to 1.92 billion at the end of the year.

In the recent earnings call, Zuckerberg acknowledged the impact on his business due to the “competitive marketplace” and named TikTok as a major challenger. “People have a lot of choices for how they want to spend their time,” he said, which is why the company is focusing more on Instagram Reels, its short-form video clone of TikTok.

The social media giant issued the warning in its annual report last Thursday as well.
To add to the problem, Meta has said it is considering shutting down Facebook and Instagram in Europe if it can’t keep transferring user data back to the U.S.

Regulators in Europe are currently drawing up new legislation that will dictate how EU citizens’ user data gets transferred across the Atlantic.

Facebook stated: “If a new transatlantic data transfer framework is not adopted and we are unable to continue to rely on SCCs (standard contractual clauses) or rely upon other alternative means of data transfers from Europe to the United States, we will likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe.”

The company added this “would materially and adversely affect our business, financial condition, and results of operations.” Talk about shooting yourself in the foot…

The reality is that Meta, and many other businesses, organizations and services, rely on data transfers between the EU and the U.S. in order to operate global services.

In July 2020, the European Court of Justice ruled the data transfer standard between the EU and the U.S. doesn’t adequately protect European citizens’ privacy. The court, the EU’s highest legal authority, restricted how U.S. firms could send European user data to the U.S. after concluding EU citizens had no effective way to challenge American government surveillance.

U.S. agencies such as the NSA can theoretically ask internet companies like Facebook and Google to hand over data on an EU citizen and that EU citizen would be none-the-wiser.

This is a convoluted situation that will eventually end up being handled by the courts both in Europe and the US along with many other countries expressing the same privacy concerns.

No one knows where Meta will end up.
Last year, Facebook shipped more than 10 million units of it’s virtual-reality headset (Quest2). In theory, users would spend lots of time interacting with friends and colleagues in virtual space, and as a result they would spend money there, too, on outfits and objects for their digital avatars.

Quest2 is the technology that involves wearing goofy-looking headgear and swinging around controllers to play 3-D games. That role play is expected to be front and center again this year, remarketed by Facebook founder Mark Zuckerberg and other techies as “the metaverse.”