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Metaverse Obsession, Apple's Privacy Jolt: What Really Went Wrong for Meta

Meta's troubles include Apple's privacy policy, and – believe it or not – a hike in Indian data plans.

Published
Tech News
3 min read
Metaverse Obsession, Apple's Privacy Jolt: What Really Went Wrong for Meta
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Meta's shares plunged about 26 percent on Thursday, erasing $250 billion or over a quarter of the company's market value. This was a direct reaction to a poor earnings report, a stagnating user base, and a weaker-than-expected outlook.

The most striking problem? Facebook saw global daily active users decline from the previous quarter, from 1.930 billion to 1.929 billion. This is the first time this has happened in the 18-year history of the company.

The earnings call between Meta's management and different stakeholders on Wednesday for the fourth quarter of 2021 gives us some insight into its troubles, which include Apple's privacy policy, the CEO's obsession with the Metaverse and – believe it or not – a hike in Indian data plans.

Here's a breakdown of what went wrong:

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TikTok vs Shorts vs Reels

Mark Zuckerberg pointed out two things at the beginning of the call.

  1. Competitor platforms like TikTok and Youtube Shorts are growing fast. In response, Meta has shifted focus towards short-form video like Reels, to rope in young adults.

  2. Revenue growth will continue to face pressure because of users shifting towards newer formats and spending less time on Meta's more lucrative services like News Feed.

"People have a lot of choices for how they want to spend their time and apps like TikTok are growing very quickly. And this is why our focus on Reels is so important over the long-term," he said.

Meta's growth is also stagnating in the US and Canada, two of its most profitable markets, due to a "high level of penetration."

After launching internationally in 2017, TikTok has already amassed 1 billion monthly active users, becoming one of the fastest-growing apps worldwide. YouTube Shorts is pulling in over 6.5 billion views a day and has crossed 5 trillion views in total.

Apple's Privacy Push

In a fresh push towards privacy, Apple introduced significant changes last April. It altered its iPhone software to require apps to ask users whether they want to be tracked, seriously limiting the ability to gather data used for targeted ads.

This has been a devastating blow to Meta because over a billion people use iPhones and Meta makes around 98 percent of its revenue from advertising.

Chief Financial Officer Dave Wehner said the company expects the Apple policy to cost it more than $10 billion in lost sales for 2022 – about 8 percent of its 2021 revenue.

Wehner also suggested that Apple’s ad policy favours Google, reflecting their longstanding business relationship between the two.

“We believe Google’s search ad business could have benefited relative to services like ours that face a different set of restrictions from Apple and given that Apple continues to take billions of dollars a year from Google search ads, the incentive clearly sits for this policy discrepancy to continue," he said.

Google, which is also heavily dependent on ad revenue, relies on what customers input into its search bar to track their interests, rather than data collected from app and web tracking.

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Indian Telcos Hike Prices, Facebook Suffers

During the call, Wehner remarked that user growth in India was limited by an increase in data package pricing. And India counts, because it has the highest number of Facebook, Instagram, and WhatsApp users in the world.

Telecom companies Bharti Airtel, Vodafone Idea and Reliance Jio had increased their data rates in the range up to 25 percent in the December quarter.

"If you look at the Rest of World, we've seen some headwinds there, kind of a little bit unique in the quarter in areas like India, where we saw data plan pricing increase lead to slower growth there."
Dave Wehner, Meta CFO

"We believe that some growth was pulled forward by COVID into prior quarters within markets like India and Latin America," he said, adding, "India’s been a particularly strong market for us in terms of growth."

Consequences of the Metaverse Push

Meta's mammoth push towards the metaverse – a version of the internet which banks on interaction in virtual spaces through artificial and virtual reality – has also had consequences.

Zuckerberg last year said that Meta would need to invest many billions of dollars for years to come before the metaverse reaches scale.

The company's VR and AR consumer business unit Reality Labs, that is at the heart of the metaverse efforts, posted a $3.3 billion loss in the fourth quarter of last year and $10 billion in the whole year.

"Cost of revenue (in Q4) increased 22 percent, driven primarily by Reality Labs hardware costs, core infrastructure investments, and payments to partners," Wehner said.

Recently Meta announced that it is building what will be the "the fastest AI supercomputer in the world when it’s fully built out in mid-2022."

In recent years, Meta has been involved in multiple controversies regarding privacy violations, and the spread of disinformation through echo-chambers. It is also involved in antitrust investigations around the world.

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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