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Will Meta’s focus on the metaverse drive original users to TikTok?

  • Meta posted the first decline in daily active users on Facebook in the company’s history during Q4.
  • Shares in Meta plummeted 26% following the Q4 results release.
  • Meta plans to spend between US$29bn – US$34bn in capex amid growing competition.

When Facebook changed its name to Meta on October 28, 2021, investors worldwide rallied behind the social media giant’s leading venture into the new digital world of the metaverse.

According to CEO Mark Zuckerberg, the name change aligns with the company’s aim to connect people through interactive technology.

As time goes on though, investors are growing wary of the social media giant’s performance on its original platforms against its focus on the evolving metaverse platform.

Just this week, Meta released its Q4 results for FY21, posting its first ever decline in daily active users on the Facebook platform compared to the prior quarter, from 1.93 billion in Q3 to 1.29bn in Q4. Monthly active users also stalled in growth to remain flat at 2.91 billion.

The 18-year-old tech company cited growing competition from platforms like TikTok as the reason for declining daily active users. Meta also said it anticipates Apple’s iOS changes will cost around US$10bn in FY22.

Meta plummeted more than 26% in its worst session on record following the release of the results, shaving more than US$200bn of its market value in a matter of hours. Meta shares fell below US$236/share amid recent tech stock volatility fueled by fears of an interest rate hike.

To entice users back onto the Family of Apps under Meta’s umbrella, the company is spending big on capex with full-year capex guidance remaining at US$29bn-US$34bn, including further investment in Reels, data centres, servers, network infrastructure, office facilities and significant expenditure in Meta’s artificial intelligence and machine learning operations.

The road ahead will be challenging in Q1 with Meta forecasting revenue will decline to between US$27bn-US$29bn, attributed to increased competition amongst ad impressions and a shift in user engagement to shorter-form videos.

Turbulence on the performance front is not the only challenge Meta faces, as the company continues to front countless lawsuits, with Aussie mining magnate, Andrew Forrest the latest to join the fray.

As increasing numbers of companies delve into building metaverse worlds like Decentraland and Sandbox, Meta currently sits in the middle ground between the metaverse future, and protecting the Family of Apps that loyal Meta users have known and trusted for 18 years.

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