That said, as compared to other platforms - notably TikTok and YouTube - Meta Platforms is somewhat lagging in the adoption of video as a primary communication and engagement tool. with cameras and it became primarily photos, now it is video. When I got started in 2004, the main medium for people to share online was text. Mark Zuckerberg describes it as follows: (emphasis added): The same metric for Facebook has plummeted to 3%, from 12% in 2015. teens say that Instagram is their favorite social media platform, versus 29% in 2015. But in the recent past, communication - and social media entertainment - has gradually moved to video.Īccording to data provided by investment boutique Piper Sandler, only 22% of U.S. With Facebook, Instagram and WhatsApp, Meta Platforms arguably owns the world's most popular infrastructure for digital communication, especially for text and phone. Meta's Need For Innovationīefore we can discuss why Zuckerberg's Reality Labs ambitions make sense, it is helpful to consider why the move might be necessary. In my opinion, reducing investments to make an already highly profitable firm slightly more profitable in the short-term will likely materially hurt the company in the long-run. "įollowing Zuckerberg's communication, investors are hoping that Meta will materially reduce R&D investments in Reality Labs, as analysts have frequently highlighted how this segment pressures the company's margins and free cash flow: for the trailing twelve months, the segment recorded a net loss of almost $12 billion on revenues of less than $2.5 billion.Īlthough as an investor I always cheer more financial discipline, I strongly disagree with the dominant market sentiment that Meta Platforms should cut funding for Reality Labs. Reportedly, Zuckerberg told employees that the company will need " to plan somewhat conservatively ," because the company will likely have " fewer resources to work with than hoped. On September 29, news surfaced that Meta Platforms is pushing to implement a hiring freeze and a company restructuring. Seeking Alpha Financial Discipline Through Lower R&D? But I remain a confident contrarian - the more META shares drop, the more I buy. Meta Platforms stock is down some 65% from all-time highs. And personally, I trust that Mark Zuckerberg can deliver on his ambitious goals. In my opinion, being on the offensive with creative innovation in a new market always trumps competition in a mature market. In my opinion, as social media penetration globally is reaching maturity, there are only two potential outcomes for Meta: either gradually lose market share and profitability in a fierce competition with online advertising companies such as for example TikTok, YouTube, and now also Netflix or innovate to take the lead in the race towards the $13 trillion metaverse economy. I believe CEO Mark Zuckerberg's push towards the metaverse is the right strategic move. In addition, investors do not like Meta's aggressive investments in R&D in order to support Reality Labs and the company's metaverse strategy.īut I beg to differ. Investors are clearly concerned about the future prospects of the social media empire, as competition with TikTok is heating up. ( NASDAQ: META), the stock has dropped lower and lower, taking out a previous "bottom" almost weekly. Ever since Facebook first presented its vision for the metaverse, and become Meta Platforms, Inc.
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