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The Metaverse Wipeout Explained

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The behemoth size of tech companies like Facebook is bound to experience crashes that can shake the market. Something like that happened to facebook’s parent company Meta. The historic plunge of Facebook’s parent company wiped $230bn from the market. Easily the biggest one-day losses in the history of US companies.

It’s not the first time Meta has seen a huge plummet in stock prices. The stock plunged 19% in July 2019, as a result of slow user growth.

The tech experts are marking this meltdown as the beginning of the end for Facebook.

Apart from wiping out $230bn from the market, there are a couple of other incidents that mark the indicators of facebook’s declining landscape.

Why Did Meta Stock Crash?

1) Meta, formerly known as Facebook, said in its fourth quarterly earnings call, that their daily active user has seen the lowest active since its inception in 2004. Facebook has seen the lowest turnout of the audience in the last 3 months of 2021. Experts say that Facebook’s ability to engage and the onboard new audience has reached its peak.

2) The company posted net revenue of $10.3 billion in the final 3 months of 2021. Which was 8% lower than the previous year. The lower user turn-out ratio is impacting the advertising costs and hence the revenue.

3) Meta also reported a loss of $10 billion of operating revenue loss due to its investment in the AR and VR unit. Zuckerberg already reported that the company earnings will be below $10 billion and Meta will now witness any real profit in the near future. But investors are resistant to making big bets for a long-term investment.

4) Meta is facing increased competition from video stars such as TikTok as well as a messaging platform like Slack and telegram.

5) The firm is also investing heavily in Reels and Whatsapp stories to stay in tune with users. It means it is spending money on services that are harder to monetize compared to the Facebook ad mechanism.

6) Meta relies heavily on its advertising capabilities and Apple’s new rigorous privacy policies are affecting advertising efficiency. The new policy tells application publishers to seek permission before sharing the data. Since most users are opting out of it, making the ads ineffective. Thus, less profitable.

7) Regulators across the US are trying to curb the power Facebook has in the tech world. The anti-trust case is being reworked and Facebook’s monopoly in owning similar companies like Instagram and Facebook. The case could go on for years without any settlement. Resulting in trust issues with the investors.

Conclusion

Tiktok is hurting Instagram’s growth too. Experts say that Instagram is currently the most profitable venture of meta, and they will focus on making it more successful in the coming future.

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