Meta, Making All the Wrong Moves
Meta as a company is floundering and no longer the industry titan it once was.
Meta's stock returns over the past five years have lagged other tech giants and the S&P 500.
The company's lack of innovation and attempts to capture a piece of every fad should concern investors.
We foresee Meta losing its position to another social media company that prioritizes what Meta will not.
To kill a little time in a public space you open the Facebook ($META) app on your phone. The first few items that pop up on your feed have no relevance to you, the items aren’t friends or family, so you scroll past it. You liked a Bleacher Report article a few months ago, and now your feed is filled with Bleacher Report content as if you’ve been waiting with bated breath for content from Bleacher Report. You keep scrolling, and you finally come across a post made by a friend. You give your friend’s post a like, but anticipating more advertisements and unconnected content before seeing something relevant to you, you close the app, and open TikTok, because they do unconnected content better than anyone else.
This is my story with Facebook, now known as Meta. It’s transformed from a platform where I could stay connected with friends and family, to a mess that is force feeding me content that I don’t care for. I said it a few months ago, that Facebook is dead, and I’m repeating it now. Facebook is a dead company walking. Investors beware.
Flowers and a Funeral
Meta has been one of the greatest creations in the history of mankind. While I despise the company’s management, and how they’ve chosen to operate one of the most influential platforms on earth, I tip my hat to what they’ve created. From the day of its public trading debut in 2013 until November of 2021, the stock price gained over 800%. It has been a big winner for early believers who held on long-term.
I used to think that Meta would be a top tier tech company forever, because the world became smaller when Facebook arrived. Facebook replaced the phone book, the yearbook, online chat rooms, and instant messaging applications with one platform. Co-workers weren’t thoughts of the past when we moved on from an employer, and schoolmates didn’t just become memories after graduation, thanks to Meta, we were able to stay connected with people we had formed relationships with. Connection is what made Facebook great, but the company has moved away from a place to connect, and that is what is causing its demise.
Leader Turned Follower + Lack of Innovation
In another effort to put even more content between the user and their connection to family and friends on the platform, The Verge reported that Facebook wants to emulate the For You page found on TikTok.
For anyone not aware, TikTok’s For You page puts interesting and popular content on a user’s feed. The algorithm behind the TikTok For You page may be the singular most valuable aspect of TikTok, and the driving force behind TikTok being the most downloaded app in 2020 and 2021. But why is Meta, the platform that built its success by connecting friends and family online, now attempting to force feed its users content that isn’t connected to them? It's because downloads of TikTok were 20 percent higher than Facebook’s, and 21 percent higher than Instagram’s, according to Sensor Tower.
The Golden Age of Social Media
In the early 2010s, the beauty of social media was that each platform was its own unique thing. My friends and family were on Facebook, Twitter allowed me to see what P.Diddy was up to, and then it became a great way to get news and information on anything I was interested in. Pinterest was a place to digitally window shop. Instagram allowed me to tell the world what was happening in my life with pictures. For anyone who had more thoughts to express than a Twitter post could accommodate, there was Tumblr. Vine brought video to the social media party, and they were very successful in doing so, and SnapChat offered men who didn’t know how to talk to women a way to send disappearing dick pics.
Facebook’s main attraction, the ability to connect with friends and family, is being pushed to the back as the company tries to keep up with the newest social media wave.
Facebook’s acquisition of Instagram was a great success. And borrowing SNAP's stories feature without asking, and implementing it into Instagram was another huge success. But remaking Meta to give it a TikTok feel doesn’t seem like another win in the making. It feels like desperation, like Facebook is willing to give up a decade of good, for a single moment of great. What will Meta do when TikTok is bested by a new player in social media, will it change again to be like the new company?
But what should make investors weary is the lack of innovation coming out of Meta. The company acquired Instagram, WhatsApp, and Oculus, but it hasn’t produced anything organically that’s been a success in quite a while. The speed dating service it tried out didn’t work, it recently put a halt on the development of its smart watch. There’s rumors that it’s going to pull the plug on its Portal device. It tried to get into the podcasting business, and that didn’t work, and its crypto project, Libra, was dead on arrival.
Meta is failing at innovation all while making the user experience of its main offering worse. This is not a recipe for stock market success.
Wave Hopping Can be Detrimental to Your Future
Wave hopping is the exercise of jumping from fad to fad in an attempt to keep up with the times.
Facebook has been wave hopping for some time now, and it’s starting to look weirder than the old man in the club. The podcast move mimicked Spotify’s focus on podcasting, the portal device attempted to grab anyone that Google and Amazon’s Alexa devices didn’t reach yet, and the smart watch was Facebook’s attempt to one-up the Apple Watch. Even the company’s move into crypto was a wave hop. Libra was just an Initial Coin Offering - which was the craze in 2017 and 2018 - with big names behind it, and now it’s attempting its own version of the For You page.
Meta’s misses are starting to cost shareholders. Meta’s stock price is down 55% from its September 2021 all-time high. While some of Meta’s losses can be blamed on the overall sell off in tech stocks, Meta’s stock was in decline nearly two months before the NASDAQ started to roll over. Since June 26, 2017, Meta’s stock has only gained 10.7%, the S&P 500 has returned 60% over the same timespan.
As Meta and its management team chases down young subscribers, they’re ignoring the pot of gold they already have on the platform. Currently, 25 - 34 year olds make up 31.5% of Meta’s users according to Sprouts Social. It’s a demo that can be served almost every advertisement under the sun. Alcohol, cars, erectile dysfunction, hair loss, weight loss, financial planning, jewelry, gifts for partners, gifts for parents, or gifts for kids, nothing is off limits to that age group. The U.S. Census states the median income for 25 to 34 year olds is around $71,000 per year. While the median income for 15 to 24 years old is just over $46,000. 25% of users on TikTok are between 10 and19 years old.
Yes, Facebook’s main demographic is aging, but they're not dead, nor are they at the point where they’re entering a nursing home. A 34 year old still has 30 to 40 years of work ahead of them. They have big vacations ahead, as well as their children's education, home purchases, car purchases, and so many other things that they could be given the motivation to buy with the right advertising.
I’ve been away from New York for several years, and I used to rely on Facebook to keep me connected to what my friends and family were doing, and how their kids were doing, but not anymore. Meta has put so much of what they think I want to see between me and what I actually opened up the app to see, that I don’t open the app anymore outside of the day when I post a link to this article.
I no longer feel Meta is a company that will last forever, in fact I have a thought on who is going to put the nail in the coffin of Meta. TikTok will not be the company that takes Meta out, Meta is going to be taken out by… wait for it, a social media platform that puts an emphasis on connecting family and friends.
As an investment, Facebook has more red flags than a 40 year old man that drives a white van with no windows, wears jorts, sports a mullet, and lives in his parent’s basement. Disrupting the connection between family and friends, which was the company’s bread and butter, a lack of innovation, and its need to hop on every wave in order to achieve a moment of greatness is a recipe for disaster. Meta is no longer a top tier tech company, it will survive for a while because of its past accomplishments, but it is knocking on the door of irrelevance.