Apple, TikTok, Telegram, Slack Are The Pain Points Of Facebook Parent Meta

Shares of Facebook parent Meta Platforms, Inc. $FB: $237.09(-0.28%) closed more than 26% lower on Thursday, wiping out nearly $230 billion from its market value after the company’s revenue growth outlook for the next quarter came below the expectations.

The company’s quarterly results reflected the impact of changes in Apple’s privacy norms on revenue. In the update of iOS, Apple required application publishers to seek permission before gathering data, much to the dismay of companies like Meta that totally depend on it for ad targeting.

“We believe the impact of iOS, overall, as a headwind on our business in 2022 is on the order of $10 billion. So, that is a pretty significant headwind for our business,” Meta chief financial officer David Wehner said on an earnings call.

Advertising at Meta also suffered a big blow as businesses cut down on their budgets in the face of supply chain issues, workforce churn, and pandemic woes.

Facebook released its earnings under the name of Meta for the first time with a new reporting structure in place.

In the fourth quarter, the company fell short of earnings estimates at $3.67 against $3.84 expected by the analysts, according to Refinitiv.

But its revenue of $33.67 billion for the quarter surpassed the estimates of $33.4 billion.

Unfortunately, the company’s expectations of $27 billion to $29 billion for the first quarter came below the analysts’ expectations of $30.15 billion, according to Refinitiv.

Not only this, analysts had been looking for a figure of 1.95 billion in daily active users on Facebook, but Meta posted a user base of 1.93 billion. The company warns of the increasing competition, particularly from short-video format app TikTok, and WhatsApp rivals– Telegram and Slack.

The company’s core social media business, coming under Family Of Apps, attracted $32.79 billion in revenue in the reporting quarter as against $28.45 billion a year ago. Operating income for the quarter came at $15.89 billion versus $13.05 billion.

Investors were particularly alarmed by Facebook’s announcement that it had lost around one million daily users globally in the final two quarters of 2021, a small percentage of the total but a possible indicator of stagnation.

The internal documents leaked by ex-worker Frances Haugen raised alarms on the mean side of FB’s business that propelled many users to opt-out from using the platform.

“It’s the first time the user base is shrinking,” said analyst Adam Sarhan from 50 Park Investment. “If the company is not growing, then it’s a complete reset for investors.”

Nevertheless, Meta is still massive, as, at the end of 2021, 2.8 billion people used one of its four platforms and messenger services at least once a day, and 3.6 billion at least once a month.

On the financial front, Meta posted a turnover of $33.67 billion, matching forecasts, but its net profit of $10.3 billion came eight per cent less than last year. The company’s core social media business attracted $32.79 billion in revenue in the reporting quarter, with operating income coming at $15.89 billion.

Meta’s Reality Labs segment pulled in $877 million in sales, higher than $558 posted a year ago. The company incurred a loss of $3.3 billion in operations, narrowing down from $10 billion.

On Thursday, Meta lost market value that is more than the market cap of companies like Oracle and Cisco and almost close to the market cap of Disney. It emerged as the top two companies behind Amazon that witnessed a sharp increase in stock activity metrics on the dashboard of Quantale. Amazon stock is running in green in the pre-market hours, up more than 11% as the company posted impressive earnings results.