Mark Zuckerberg Risks $200 Billion Loss Following Meta Rebrand
As Web3 via blockchain technology is expected to be the next big thing for digital technology, the term ‘Metaverse’ has become the most popular buzzword in recent times. The metaverse is expected to be a virtual environment for people to come and interact, build and enjoy socially, which attracted one of the biggest tech companies in the world.
In October 2021, Mark Zuckerberg officially rebranded Facebook to ‘Meta’, laying out the multi-billion dollar tech companies plans of focusing on building this virtual environment for the long term. While such news triggered a flurry of metaverse-based crypto price hikes and an insane interest in this industry, Facebook’s move has failed, at least for now. But why is Facebook not being able to take control despite such are revolutionary announcements? Let’s take a look.
From Facebook to Meta
On October 28, Mark Zuckerberg officially announced Facebook’s plans of focusing on the metaverse. The company mentioned in a press release that they planned on creating hybrid social experiences, by combining aspects of the physical world in a virtual setting.
https://twitter.com/meta/status/1453795115701440524
Zuckerberg even mentioned that the metaverse holds no barriers, it is a place for everyone to work, play shop and create together, which is why Facebook is expected to spend a total of $10 billion on research & development throughout the next decade.
As part of this vision, Facebook has started expanding into the virtual reality (VR) sector, and have started working on creating an Oculus Quest headset as a means of entering and participating in the metaverse.
Yet, things have not gone as expected for Meta.
Centralisation
One of the biggest talking points preceding this business strategy had to do with Facebook as a company. In recent years, the company has been under scrutiny due to user-related privacy, data leaks and an overall lack of privacy safeguards. In fact, the official Meta rebrand took place shortly after a Facebook whistleblower suggested that the company’s acquired brand, Instagram, was contributing to teenage depression.
With the metaverse, the association is that it will feature similar attributes as we have seen with cryptocurrency — decentralised and more user control. But the main difference is that Facebook is a centralized entity, with all the decisions coming from top to bottom. This gives users no control over the space as we see in other blockchain-focused systems. While popular metaverse-based brands like Mana and Sandbox are decentralized and give users more control while participating, Facebook will be a one-way street.
The Motley Fool also stated that with Facebook’s set-up, users will not be able to share their metaverse experiences with anyone outside of the platform. Since Facebook makes its money through ads on the platform, Zuckerberg’s interests will be on ensuring that users stay on their platform, and their platform only.
Massive stablecoin failure
Mark Zuckerberg and Facebook had almost finalized the best way of entering into the cryptocurrency sector. Their plans for a cryptocurrency launch that would make billions was ambitious but did not go through.
Facebook had almost sealed a deal with Silvergate Capital Corp after Silvergate Bank acquired Diem technology to develop a stablecoin launch. This launch was going to be Facebook’s crypto entry point since a stablecoin would make the assets less volatile. The deal worth $200 billion was cancelled last minute in November after the Diem director jumped ship after a fierce push-back from regulators and central banks.
Facebook has a long history of making big acquisitions rather than creating new products from the ground up -as we have seen with Instagram, WhatsApp and Oculus, which has helped them scale further.
So the failure to buy their way into a perfect method for stablecoin investments has slowed down the metaverse process even further. But the final needle in the coffin has to do with their quarterly earnings, which has tanked their stock prices.
Facebook crashes by 20%
Investors are not convinced about Facebooks’s plans to dive right into the metaverse. Since the announcement in October, there has been no concrete plan containing their short-term or long-term objectives. While the failed Diem technologies deal meant that the social media giant’s stablecoin ambitions came to an abrupt halt, the fourth-quarter earnings reports are out — and have not met expectations.
According to CNBC, the earnings per share were just $3.67, against the expected $3.84. The company has also failed to show significant growth in daily and monthly active growers, which was expected to be higher following the Meta news. Revenue for the first quarter of this year is expected to be at $27 billion, while analysts expected a number higher than $30 billion.
But the biggest news that has emerged on February 2, 2022, is that the Meta stock has now tanked by more than 20% during after-hours trading. Once the market opens on February 3, Facebook could see close to $200 billion or even more be wiped out from their total market cap.
As for Zuckerberg, he could lose $25 billion on market opening if the after-hours trading dip continues. This would further remove him from the top 10 richest people in the world.
Facebook reported that competition was a big factor due to the below-expected earnings, mainly from Tiktok. Facebook’s newly formed Reality Labs company, which is the VR business has registered a net loss of more than $10 billion, which is another significant blow to the metaverse prospects.
https://twitter.com/business/status/1489243017236131840
The solution
While the company has stated that the Metaverse project is a long-term project, their best call may be to make a few acquisitions to enter into the sector. One such opportunity could be by purchasing another gaming and metaverse heavy company. Roblox Corp is a very popular gaming company that has been surging after the metaverse announcement and attracts more than 50 million daily visitors. Furthermore, the company already provides users with the chance to attend virtual concerts, host live chats with friends and provide similar activities to what Facebook is looking to do. Such a strategic acquisition could change the meta-landscape, especially since Facebook is facing an uphill battle during the start of 2022.
