In a recent interview, Meta Platforms’ CEO Mark Zuckerberg admitted that he missed a key social media trend. The “mistake” has cost billions of dollars to Meta Platforms’ investors as the stock is now languishing at the lowest level in four years.
TikTok has been taking away market share from US social media companies including Facebook, Instagram, and YouTube. Both Alphabet and Meta Platforms have taken steps to promote short videos to challenge TikTok.
Zuckerberg meanwhile minced no words and admitted that TikTok has been a “very effective competitor.” In an interview published in analyst Ben Thompson’s Statechery newsletter, Zuckerburg said, “The thing that I think I sort of missed there though is there’s a different loop around how people interact with discovered content.”
Zuckerberg said that previously people were largely interested in content from their connections. He added, “but I think it is by and large shifted to you use your feed to discover content, you find things that are interesting, you send them to your friends in messages and you interact there.”
Zuckerberg also said that users are now interested in the best content irrespective of its creator. He also pointed out that users are now increasingly glued to videos and spend more than half of their time on Facebook watching videos.
Mark Zuckerberg Might Have Underestimated TikTok’s Popularity
Zuckerberg said that Meta Platforms need to work on AI functionality to recommend content to users. He added, “I think having the ability to kind of intermix video, photos, text, all these different things, content from friends, content not from friends is going to be a really big advantage.”
Meta Platforms is facing structural issues. There is a global clamor over data privacy issues and targeted ads which is hurting social media companies. Apple’s iPhone privacy rules were also a dampener for Meta Platforms and the company estimates that it would lose up to $10 billion in revenues this year due to the new privacy rules.
Facebook has reached peak penetration in most markets and the app’s popularity has fallen among teens. Now, a survey conducted by Piper Sandler has shown that TikTok’s popularity among teens has risen and it is the most popular social media platform.
Snap comes second while Instagram is third. Instagram’s popularity has come down since spring. Notably, last year Instagram was looking to launch an app for teens but it was thwarted by US lawmakers.
Meta Platforms Stock Has Crashed in 2022
Meta Platforms stock is down over 61% in 2022 and is among the top S&P 500 losers. The company is looking at different ways to revive its fortunes. For instance, it partnered with Indian conglomerate Reliance to let users shop for groceries on WhatsApp.
It also recently unveiled the Meta Quest Pro VR set which would cost $1,500 and is targeted at working professionals. The company also announced a partnership with Microsoft and Zoom Video Communications. Under the partnership with Microsoft, Meta Platforms’ VR sets would get Office 365 and Microsoft Teams.
While most analysts have a buy rating on Meta Platforms stock, some have turned apprehensive amid the structural slowdown.
Zuckerberg Sees Metaverse as a Key Driver
Zuckerberg is bullish on metaverse in the long term. However, Meta Platforms’ metaverse business is currently losing billions of dollars every quarter. It lost more than $10 billion in 2021 and has lost around $6 billion in the first six months of 2022. Companies like Nvidia also see metaverse as a key growth driver. We have a list of companies that are a play on metaverse.
Coming back to Zuckerberg’s comments on TikTok and the tectonic shift in social media, Meta Platforms has its task cut out as it seeks to maintain its lead in the global social media space. The company has to effectively compete against privately-held TikTok.
While TikTok parent ByteDance is losing billions of dollars every year, it is reporting strong revenue growth. In contrast, Meta Platforms reported a YoY fall in revenues in the second quarter and predicted a yearly fall in revenues in the third quarter also.
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