Meta shareholders demanded to limit Metaverse spending “Xiao Zha” bet on the wrong bet?

[CNMO] Recently, Altimeter Capital, a long-term shareholder of Meta, called on the company to cut salary costs by at least 20% and limit the annual Metaverse spending to less than $5 billion. And just a year ago, Facebook changed its name to Meta Platforms to highlight its focus on the metaverse.

Zuckerberg and Meta

Brad Gerstner, CEO of Altimeter Capital, wrote in a blog post that Meta has lost its focus and its stock has underperformed its peers. Altimeter Capital holds 2.5 million Meta shares, or 0.11% of outstanding shares, the data showed. The Meta is down 61% this year, while the Nasdaq 100 is down 30%.

The name change heralds Meta’s plans to bet its future on the metaverse. But as revenue growth has slowed, Meta has had to cut costs and freeze hiring in response to stiff competition from other platforms. Could it be that the Metaverse is a scam after all, is Xiao Zha still betting on the wrong one after all?

How is Meta now?

Recently, Meta reported third-quarter earnings that were lower than market expectations. Net profit in the third quarter was only US$4.4 billion (approximately RMB 31.8 billion), less than half of the net profit of US$9.2 billion (approximately RMB 66.5 billion) in the same period last year. So far, Meta has experienced four consecutive quarters of profit decline. In particular, the loss of the reality lab business, including the Metaverse business, widened to $9.4 billion (about 67.95 billion yuan) in the third quarter alone.

Falling Meta share price

The result of lower earnings is, of course, lower stock prices. At present, Meta’s share price has fallen by about 25%, and its market value has plummeted to $263.2 billion (about 1.9 trillion yuan). This is in stark contrast to last year’s market value of $1 trillion (about 7.2 trillion yuan), which placed it among the top five large technology companies in the United States. Some foreign media pointed out that it is not even in the top 20 in the United States based on today’s market value.

Is Meta “pulled” the cauldron of the Metaverse?

Let’s start with the conclusion, yes, but not quite. Judging from the above data, the Metaverse project is definitely a drag on Meta. Think about the concept of a project that can lose more than 60 billion yuan in a quarter.

However, although the Metaverse has caused Meta to lose a lot, there are early signs of Meta’s decline. In fact, Facebook’s stock price fell a lot before it changed its name to Meta. Compared with several other large Internet companies, Facebook at the time lacked a real “moat”.

Although Xiaozha owns two “popular” softwares, Facebook and Instagram. But in the final analysis, it does not have an absolute advantage in foreign countries like Tencent does in China. If Twitter is like Weibo in China, no matter how bad you say it is, most celebrities will still register accounts on it. Then Facebook is like QQ abroad without Tencent games and WeChat payment. It is indeed used by many people, but when there is no unique Meta in the market, when someone comes to share the cake, it will naturally appear a little “beatable”.

Tik Tok

So is there anyone in the market to share the cake? Yes, that is Tik Tok (the overseas version of Douyin) that we are all familiar with. Judging from the published data, in July this year, Facebook had 2.04 billion users aged 18 and above outside mainland China; while TikTok had 1.02 billion users aged 18 and above outside mainland China. It seems that Facebook still has a lot of advantages, but in fact, the growth rate of Tik Tok can be said to crush Facebook.

And although Facebook has more users over the age of 18 than Tik Tok, since ByteDance does not publish the audience contact data of users under the age of 18, it is very likely that there are more users under the age of 18 than Tik Tok than Facebook.

Of course, in the final analysis, there are not so many points of conflict between these two softwares. After all, one is social software and the other is short video software, but the worst thing is that the revenue methods of these two software conflict (advertising). Meta advertising revenue in the quarter was US$27.2 billion, down nearly 4% year-on-year, accounting for 98.2% of the company’s total revenue. Tik Tok’s “help” is indispensable here. As the saying goes, breaking people’s money is like X-person parents. Xiao Zha looks at Tik Tok and wants it to disappear in this world every minute.

So, Meta “pulled it”, the Metaverse is going to take part of the blame, but not all of it. Most of the remaining reasons are because Tik Tok is too strong and can’t beat Facebook.

Why bet on Metaverse?

It’s actually very simple. When Xiao Zha encountered Tik Tok’s strong attack, he didn’t resist. He also tried to make short videos, but he couldn’t play it. Xiao Zha had no choice but to open up new fields and use other methods to defeat Tik Tok.

AR technology

Although these words are just speculation, Xiao Zha must have studied Tik Tok before betting on new fields. At that time, Xiao Zha looked around, and everyone had almost played the new things, and there were basically no copies that could be copied. What should I do? Hey, at this time, Xiao Zha saw the rise of AR and VR led by 5G, and it was quite thriving, so he decided to do this thing.

But there are some people in the AR and VR industry who have been playing for many years, and they don’t have any first-mover advantage. At this time, let’s smart little Zha think about it, why don’t I change my name. So a year ago, the Metaverse was born like this. Many AR and VR industry workers woke up overnight and found that they had become practitioners in the Metaverse industry, and suddenly felt a strange feeling of being “NTR”.

Some people let Xiao Zha say, “Ah, yes, yes, what I do is the Metaverse.” Some people are not used to this statement. Apple Vice President: “I will never use the word Metaverse.” But no matter what it is , anyway, Xiao Zha dived into the metaverse world, quite a taste that he must make this project a success at all costs.

Zuckerberg metaverse image

Some people say the metaverse is a hoax, some people say the metaverse works, and I’m right. With the current technology, it is impossible to achieve the ideal metaverse of mankind, but if the technology matures in the future, the metaverse is indeed the direction of development. Nowadays, many people say that the Metaverse is feasible, but Xiao Zha is in a hurry, but maybe Xiao Zha understood this a few months ago, maybe he just wanted to give himself hope, or maybe he It’s just that after the sunk cost is invested, he is locked up for himself.

Meta shareholders are demanding less investment in the Metaverse, are they not optimistic about it?

In fact, the fact that Meta shareholders asked Meta to reduce their investment in the Metaverse this time did not actually mean that the Metaverse could not work, otherwise, he should have said that he hoped that Meta would directly stop the Metaverse project. The actual idea of ​​this shareholder is that we need to be steady. Now that we spend money without restraint, we need to reduce costs, and the focus is not on the Metaverse, but on employees (layoffs or salary cuts).

“Reduce salary costs by at least 20%, and limit the annual expenditure of the Metaverse to less than $5 billion.” Note that a reduction in salary costs of at least 20% represents not only a pay cut for employees, but also cost savings from layoffs. It is estimated that if this 20% can really be cut down, Meta will increase its cash flow by $35 billion, which is a lot more than the 5 billion in the Metaverse.

Summarize:

In any case, Xiao Zha’s current bet on Yuan Universe seems to be a “stinking move”, but as long as he can maintain a good balance and develop slowly, he can still succeed in the future. In the history of the development of the Internet, there are many technologies and products that were laid out a long time in advance. Perhaps some people who sing badly about Meta now will tout his excellent vision in the future.