https://www.cnbc.com/2022/09/30/facebook-scrambles-to-escape-death-spiral-as-users-flee-sales-drop.html
Death spiral or dip?
I have more FB stock than I would like just through index funds, so not like I would buy. But I would not count Meta out.
>spiral or dip
Given that FB can't attract teens, I think it is a long, slow decline.
Massive layoffs at META starts next week
https://www.teamblind.com/post/Massive-layoffs-at-META-starts-next-week-6bDXueAR
I think for FB it's a long slow decline. Agree with that.
I guess what I was asking was more: Is this Apple or IBM or DEC?
At a certain point, I would have predicted Apple going the way of DEC or Wang. But they had a pile of cash, Jobs turned out to have a brilliant design vision that brought the iPhone out, and they also switched iOS to *nix and that made it the developer machine of choice in the web age and now it vies for most valuable company in the world.
IBM - long slow decline, completely exited from the core business, but seems to have made a soft landing as a company (minus thousands and thousands of employees) based on its IP and a few other assets and skills that never seemed like core skills. And they beat Gary Kasparov at chess.
DEC - once a fearsome competitor, but they really just had no meaningful business or IP or skills once mainframes were not required for small town accounting or school system records (I first learned programming on the school's PDP 11, BASIC and later PDP 11 assembly language).
In other words, do you think Zuck and company can use current income and cash and develop something in the metaverse before they become too irrelevant as a company? I think VR, AR and metaverse stuff could be huge, but right now I don't see Meta actually taking it over, but it's not like they'll be running out of cash in the next year either. So they have time for a Jobs figure to come along and save the company.
> Is this Apple or IBM or DEC?
Or is the slow decline of Yahoo or AOL a better analogy?
Facebook's Monopoly Is Imploding Before Our Eyes (https://www.vice.com/en/article/epzkne/facebooks-monopoly-is-imploding-before-our-eyes)
Quote
In a February 2022 earnings call, chief financial officer David Wehner said those operating losses would "increase meaningfully" this year. And they have. Another $9.4 billion in losses have been realized in just the last three quarters, bringing Reality Labs' operating losses to north of $31 billion. On this week's third quarter earnings call, Wehner warned that they "anticipate that Reality Labs operating losses will grow significantly year-over year." Meta's stock has fallen about 70 percent this year.
By all indicators, the metaverse is a wasteland devoid of any souls save those who are too zealous or too well compensated to realize admit how stupid it is. For now. While Zuckerberg's main contribution has been to add legs to his company's avatars and ship out nausea-inducing headsets needed to access this realm, he promises that this new world he's building should be ready in 10 to 15 years.
...
In a Q1 earnings call, Facebook warned that Apple's 2021 privacy changes to its iOS operating system—which makes it harder for third parties like Facebook to harvest data to target users—would be "a pretty significant headwind for our business" to the tune of $10 billion in advertiser revenue this year. In a Q2 earnings call, Zuckerberg warned of "an economic downturn that will have a broad impact on the digital advertising business." Sure enough, over the past four quarters, Facebook's ad revenue has faltered: $33.67 billion (Q4 '21), $26.998 billion (Q1 '22), $28.152 billion (Q2 '22), and $27.2 billion (Q3 '22), with first-ever year-over-year declines reported these last two quarters.
The Economist had an interesting take. Behind a paywall, but they break the post-dot-com tech giants into three business models
- movers: they move people or things around (Uber, Doordash)
- streamers: Netflix, Spotify
- creepers: the follow us around and sell us to advertisers (Meta, Alphabet, Snap)
Over the past year, Uber, DoorDash, Snap, Meta, Netflix and Spotify have shed 2/3 of their market cap.
Uber is still losing money and has a net loss to date of $25bn.
Disney+ was 1.1bn in the hole just in the second quarter of this year. They spent $30bn on content, which is pushing Netflix to spend $17bn
The author sees three main business model weaknesses.
1. Network effects.
Many of these companies bet big on network effects. Uber thought that if you got enough riders and enough drivers, wait times would drop, efficiencies would improve and so forth. The problem is that to go from a 2-minute wait to a 1-minute wait requires twice as many drivers, but riders don't really notice. So what it got wasn't more efficiency, but decreasing efficiency as it scaled.
Similarly, Netflix investors believed that huge user database with careful tracking would allow Netflix to come up with hit after hit in a way that traditional studios, lacking precise engagement metrics, could not. But Netflix still managed to produce "True Memoirs of an International Assassin," which pulled a rare 0% fresh on Rotten Tomatoes.
Finally, the creepers are utterly dependent on network effects for growth. But at a certain point, the network flywheel starts spinning in reverse, as per Littleman's post above for Facebook.
2. Low barriers to entry
A lot of companies got off the ground with cheap services, open source software, reusable software components and so forth. The problem is, the tools just get better and cheaper and their rivals can now start up even cheaper and have even lower barriers to entry. If the network effect is not enough for first movers to keep users, then the low barrier to entry that helped them get going, is now a liability.
3. Reliance in distribution platforms they don't own.
Uber and Doordash pay a lot to advertise on the Apple and Google app stores. Spotify pays 15% to Apple for everyone who subscribes through the app. And, of course, it's even worse for the creepers who are finding that Apple, and now even Alphabet, want to make it harder and harder for them to collect the data that is their lifeblood.
https://www.economist.com/business/2022/10/31/what-went-wrong-with-snap-netflix-and-uber
Meta will begin laying off employees on Wednesday morning (https://www.reuters.com/technology/meta-will-begin-laying-off-employees-wednesday-morning-wsj-2022-11-08/)
Meta's Reality Labs lost $3.99 billion last year, bringing its total losses since 2020 to $30 billion (https://www.techspot.com/news/98475-meta-metaverse-focused-reality-labs-lost-399-billion.html)
>It seems that no matter how much money Meta's Reality Labs unit loses, Mark Zuckerberg refuses to give up on the company's metaverse ambitions. In its first-quarter earnings report, Meta said Reality Labs, responsible for its metaverse-related tech, recorded a $3.99 billion operating loss. The latest figure means that since 2020, the division has lost a massive $30 billion.
Meta Platforms stock soars after earnings crush expectations, expenses drop
Actual vs Bloomberg estimates:
Revenue: $28.65 billion actual versus $27.67 billion estimated
EPS: $2.20 actual versus $2.01 estimated
Advertising Revenue: $28.1 billion actual versus $26.76 billion estimated
Family of Apps Revenue: $28.3 billion actual versus $26.88 billion estimated
Reality Labs Operating Losses: $3.99 billion actual versus $3.8 billion estimated
Q2 Revenue: $29.5 billion-$32 billion actual versus $29.48 billion estimated
"We had a good quarter and our community continues to grow," said Meta CEO Mark Zuckerberg in a statement.
"Our AI work is driving good results across our apps and business. "
What AI work??
https://finance.yahoo.com/news/meta-platforms-stock-hits-15-month-high-after-earnings-crush-estimates-expenses-drop-152708907.html