Of all the surprising twists and turns in the 21st century saga that is Facebook (or Meta, the company's umbrella branding), the precipitous dive in the company's value this month is one of the most spectacular. While company valuations rise and fall – think of Apple, now one of the world's most valuable companies, but on corporate life support in the 1990s – Facebook's skydive knocked its share price by a fourth and wiped a breathtaking $250 billion off its market worth.
Few companies in the world would even be valued at $250 billion. As New York Times columnist Farhad Manjoo noted, "Facebook's value has slumped by more than what all but the largest companies are worth." The trigger was the company's admission that, after nearly two decades of expansion, growth has halted. While flagship product Facebook has faced slowed growth before, users fell by a significant half a million in one quarter, the first such loss in Facebook's history.
Though acquisitions WhatsApp and Instagram have grown Meta's user base, it isn't clear if growth will continue there either, or even whether these apps will be significant Meta money-makers. Meanwhile, the valuable youth market has been migrating elsewhere. Meta's WhatsApp, Insta and Messenger may be mainstream, but younger users have shifted significant time and attention elsewhere, to TikTok for example.
Other threats have damaged Meta/Facebook too. Most prominent and with long-term implications for many companies is Apple’s privacy-supporting decision to automatically opt iPhone users out of sharing data with apps like Facebook. Users must specifically choose to opt in. This hits hard at Meta’s ability to track users and gather data about their activities and then generate advertising income from that data, the foundation of the company’s “surveillance capitalism” business model. Meta said this single change could cause a $10 billion hit to 2022 sales revenue.
Meta/Facebook face other data headaches, too, emanating from Irish and EU regulatory court decisions, the added uncertainty of pending decisions, and ongoing EU/US government data transfer negotiations. These constrain and further imperil its ability to transfer data.
This led to a petulant note in the earnings report: Meta stated it might have to pull out of Europe, a claim that drew derision not least because Europe is a valued growth market.
One additional sharp slap ended the week. In response to a complaint from the Irish Council for Civil Liberties, EU ombudsman Emily O'Reilly opened an inquiry into the adequacy of European Commission pressure on Ireland's Data Protection Commission (DPC) to speed up crucial decisions on General Data Protection Regulation-related complaints. Among the most high profile? Those involving, yes, Meta.