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More powerful, more terrifying and more “virtual”

On May 18, 2012, Facebook “launched” Nasdaq. It is the largest technology IPO for a US company and the third largest in any industry, behind only Visa and General Motors.

A decade ago, Facebook announced that it was pouring money into smartphone apps because mobile was key to the company’s growth, although it wasn’t directly generating significant revenue at the time. The information is in the prospectus for listing on Nasdaq. Facebook’s IPO is the largest in US technology history. With a market capitalization of more than 100 billion USD, Facebook immediately became one of the most valuable technology companies on the planet.

Within three months, though, Facebook stock lost nearly half its value. Investors worry that the glorious days that Facebook offers are just “drawing cakes”.

History shows that Facebook did. Today, Facebook is 25 times bigger than 10 years ago in terms of revenue. In 2018, more than 90% of its ad sales came from mobile. When capitalization peaks in 2021, Facebook is worth more than $1 trillion, largely relying on the power of its Facebook, Messenger, Instagram, and WhatsApp apps.

Facebook changed its name to Meta. The top 6 leaders on the day of the IPO this year are only 2, that is co-founder and CEO Mark Zuckerberg, COO Sheryl Sandberg.

For investors, the dilemma seems to be repeating itself. The technology market is changing, Zuckerberg continues to bet on a technology far away: the virtual universe (metaverse). In October 2021, he said that Meta will spend about 10 billion USD to develop technology to build the metaverse, a virtual world where people work and play through headsets.

As of 2012, no business model like it has ever existed, and there’s no guarantee Zuckerberg’s vision will be on the right track. Brian Yacktman, chief investment officer of YCG Investments, likens this game to finding an oil field: you can either go broke or become very rich.

The murky future of the metaverser is just one of the reasons Meta stock is down 47% after hitting a September 2021 peak. It is by far the worst performer of the six most valuable US tech firms. In the fourth quarter of 2021, Meta users dropped for the first time, while Apple’s new privacy policy greatly affected the ability to deliver targeted advertising.

In addition, Meta was seriously discredited after former employee Frances Haugen leaked internal documents, accusing Facebook of being aware of the harmful effects of its products, especially to young people, but did not fix it. Mr. Yacktman still holds Meta shares, but his company has not bought any more. According to experts, the wave of sell-off reflects the market’s view that the metaverse is like a “black hole” sucking money and is nothing more than a toy of Zuckerberg. Meanwhile, Facebook still ranks second in the US digital ad market, a market that Insider Intelligence expects to grow by nearly 50% to $300 billion by 2025.

Record IPO

Over the past decade, Facebook has been free to “flirt”. Their 2012 IPO went down in history. Facebook raised $16 billion, making it the third-largest IPO for U.S. companies, behind only Visa in 2008 and General Motors in 2010. At the time of the IPO, Facebook was the dominant name in the Internet market with more than 500 million daily users and $1 billion in quarterly revenue. Facebook’s valuation skyrocketed in the secondary market.

Due to a technical error, Facebook stock remained roughly flat on the first day of trading, then fell 19% over the next two days. Only in August 2013 did Facebook stock recover to the IPO level ($38). Kevin Landis, chief investment officer at Firsthand Capital Management, witnessed the entire drama from his office in San Francisco, about 20 miles from Facebook’s Menlo Park headquarters.

His company bought Facebook shares in the private market in 2011, a decision he considered smart until the stock collapsed after the IPO. He held the investment until 2014, when the stock rallied and traded around 70. Another fund of his started buying Facebook stock when the price was around 20 and he held it until it hit 200. when the Covid-19 pandemic started.

“The math is simple: Facebook will be a powerful advertising platform.” The only comparable model is Google. Facebook can be a significant part of Google. However, Mr. Landis himself has never opened his personal Facebook because he is concerned about privacy. “I broke my own rule: invest in something I thought would be great, but didn’t get into it myself.”

That is really a bargain. At the end of 2013, mobile advertising accounted for 45% of Facebook’s ad revenue, up from 11% in 2012. From 2013 to 2018, Facebook’s revenue growth averaged 50% per year.

The machine is so powerful that it seems unlikely that any bad news can affect Facebook’s finances. After Donald Trump won the 2016 US Presidential election, Zuckerberg repeatedly downplayed the role of social networks in spreading disinformation and election interference from Russia. In 2018, the Cambridge Analytica scandal broke out, and the press reported that this business had accessed the data of 87 million Facebook users and used it to support Trump’s targeted advertising during the election.

Most recently, Ms. Haugen’s denunciation late last year and a series of articles in the Wall Street Journal and other news outlets detailed Facebook’s focus on growth, ignoring its negative consequences.

“Extremely chaotic emotions”

Facebook’s conduct has led to numerous government investigations. Officials were repeatedly called to testify before the US Congress. In September 2021, some US lawmakers accused the company of following the “handbook” of tobacco companies, which is to “promote a product they know is harmful to the health of young people”. in the words of Senator Ed Markey.

Haugen’s profile coincides with the end of a bull market for Facebook. The industry as a whole is nearing its peak and has been going down since November last year amid fears of inflation and rising interest rates. For Meta shareholders, the worst day on record was in February. Facebook shares fell 26% after the company forecast weak revenue and possible $10 billion in losses due to Apple’s privacy changes on iOS.

No longer the days of rapid expansion like a few years ago, Facebook now faces the risk of revenue decline in the second quarter amid inflationary pressures and the Russia-Ukraine war as well as the rise of TikTok, the video platform. short from China.

David Golden, a partner at research firm Revolution Ventures, said that Meta is not in a disaster of doom or will go bankrupt or run out of money. It’s just an uninteresting story for the foreseeable future. Facebook’s ability to keep up with the market has suffered from alternative competitors in the social networking space and other channels.

Zuckerberg, 38, who still maintains control over the company and board, doesn’t talk much about social media or mobile advertising these days. Instead, he devoted himself entirely to the metaverse and Meta’s Reality Labs division. The division lost nearly $3 billion in the first quarter and brought in only $695 million, mainly thanks to VR headsets.

Last month, he admitted, it wasn’t until the actual products were on the market and scaled up, and the market was big enough, that the virtual universe contributed significantly to the company’s revenue or profit. He expects the 2030s to be extremely exciting and is determined to lay the groundwork for that day.

Landis, who hasn’t held a Facebook stock in two years, says he’s more scared than excited by Zuckerberg’s vision and views immersion in the virtual world as “extremely out of date”. “I hope it won’t take over, but just improve people’s lives.”

Given how well Facebook knows its users and what the public has learned about Facebook’s privacy and data practices in recent years, Mr. Landis doesn’t believe Meta will do the right thing. “It’s impossible to look at this company without having mixed feelings about it,” he said.

Du Lam

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