Meta Execs Predict Rough Seas Ahead
One of the biggest names in the U.S. tech industry may be preparing itself for stormy seas ahead. A combination of a generally risk-averse market mood and some factors specific to Meta may be the culprit for this gloomy outlook for the firm.
Zuckerberg Predicts Slowdown
This past Thursday, June 30th, top executives at Meta (META) held a videoconference with the social media pioneer’s nearly eighty thousand employees. According to billionaire founder Mark Zuckerberg, Meta is on the precipice of one of the ‘worst downturns’ the company has faced in recent times.
Over the course of the call, Zuckerberg implied to the tens of thousands employed by Meta that the days of plenty are drawing to a close. According to the company’s CEO, employees will have to do their work with fewer resources than had been available before, and internal evaluations will likely be more stringent in order to trim the fat from Meta’s payroll. Furthermore, Zuckerberg stated that there are likely many in Meta’s offices who should find their place of employment elsewhere.
This ominous digital conference comes on the heels of the recent news that Meta would be hiring fewer engineers for its platforms than previously planned. Under seven thousand new engineers are expected to join the company this year, a cut of about thirty percent. While this curb of hiring is common to many of the biggest names in American tech lately, Meta is facing a few unique challenges that may have additionally influenced this decision.
Pivot Without Payoff
While interest in the still-nascent sphere of the metaverse has spread throughout the upper echelons of Silicon Valley, Meta has made a stronger pivot toward this new technology than most. The firm’s Facebook Reality Labs division, responsible for augmented & virtual reality branches, posted a loss of almost $3 billion in the first quarter of this year. However, this massive figure does not seem to have dissuaded Zuckerberg from going in big on the metaverse; in late April, he emphasised on the firm’s quarterly earnings call that Meta aims to take full advantage of the monetisation opportunities offered by the metaverse.
Despite these plans, policy changes at industry peer Apple (AAPL) may have led to a loss of revenue for Meta that may have otherwise contributed to further investment in the development of new technologies. Meta’s advertising branch took a major hit earlier this year when Apple announced that it would introduce changes to iOS privacy settings which make it more difficult for advertisers on the Facebook and Instagram platforms to target their ads to potential customers. According to the company’s own estimates, Meta could lose up to $10 billion in advertising sales in 2022 due to the changes.
This blow to Meta’s revenue strategy may have been one of the proximate causes behind the firm’s back-to-back quarterly losses, the first time this has occurred in over ten years. Investors could have grown to share expert opinions’ regarding the near-term trajectory of Meta’s prospects as well; the firm’s share price has lost more than 52% of its value so far this year.
It seems to be growing clearer that the significant headwinds faced by Meta are not likely to abate in the near future. While the tech sector as a whole is struggling to re-achieve steady, stable growth, how Meta grapples with the specific challenges in its path has yet to be seen.
