Meta Platforms Inc, which owns Facebook, saw its stock drop more than 20% late Wednesday after the social network firm issued a weaker-than-expected projection, blaming Apple’s privacy restrictions and greater competition for consumers from rivals such as TikTok.
Apple Inc.’s privacy changes to its operating system have made it difficult for businesses to target and measure their ads on Facebook and Instagram, according to Meta, which missed Wall Street’s earnings projections. Macroeconomic factors, such as supply-chain disruptions, were also mentioned.
Due to increased competition for users’ time and a shift in engagement toward features like its short video offering Reels, which generate less revenue, the 18-year-old tech giant, which also faces pressure from platforms like TikTok and YouTube, said it expects revenue growth to slow in the coming quarter.
In the fourth quarter, Facebook reported 2.91 billion monthly active users, unchanged from the previous quarter.
The after-hours drop in Meta shares wiped out $200 billion in market value, with peers Twitter Inc, Snap Inc, and Pinterest Inc losing another $15 billion in value.
Alphabet Inc’s stock was down roughly 2% after the company reported record quarterly sales that beat estimates on Tuesday.
Meta, which has the world’s second-largest digital ad platform after Google, had previously warned that the fourth quarter would bring “significant uncertainty” to its advertising business.
On a conference call with analysts, Meta’s chief financial officer, Dave Wehner, said the impact of Apple’s privacy measures may be “on the range of $10 billion” in 2022.
Apple has made modifications to its operating software that allow users to opt out of apps tracking their online activity for advertising purposes, making it more difficult for advertisers that rely on data to develop new goods and understand their market.
First-quarter sales is expected to be in the $27 billion to $29 billion range, according to Meta. According to Refinitiv’s IBES statistics, analysts were anticipating $30.15 billion.
“It’s evident that there are several large barriers ahead,” noted Insider Intelligence analyst Debra Aho Williamson, “as Meta faces difficult new competition for ad revenue, such as TikTok, and as it struggles with continued ad targeting and measurement challenges from Apple’s iOS updates.”
According to IBES statistics from Refinitiv, the company’s overall revenue increased to $33.67 billion in the fourth quarter from $28.07 billion a year earlier, topping analysts’ projections of $33.40 billion.
“The success we made this year in a number of crucial growth areas including Reels, commerce, and virtual reality has encouraged me, and we’ll continue to invest in these and other key priorities in 2022 as we seek to construct the metaverse,” CEO stated.
During Meta’s earnings call, he mentioned that competition for customers was one aspect affecting the business, specifically noting TikTok, a short video app, and underscoring Meta’s commitment to offering services to young adults.
For the full year 2021, Meta’s Reality Labs, the company’s augmented and virtual reality division, lost $10.2 billion, compared to a $6.6 billion loss the previous year. This was the first time the corporation had separated this segment from the rest of its performance.
Zuckerberg previously stated that the company’s investment in this area would reduce operating profit by $10 billion in 2021 and that it would not be profitable “any time soon.”
In 2021, Reality Labs generated $2.3 billion in revenue. The business has kept the sales figures for its virtual reality Quest headgear under wraps.
The business announced on Wednesday that its stock symbol would change to “META” this year, the latest step in its rebranding to focus on the metaverse, a futuristic concept of virtual spaces where users may work, connect, and play. Meta declined to comment on the price of a contract with Roundhill Investments, which said in January that its Roundhill Ball Metaverse ETF will no longer use the ticker.
The IT behemoth, which changed its name in October to reflect its metaverse ambitions, believes the metaverse will be the mobile internet’s successor.
“Investors looking at Meta are starting to realise that buying their stock isn’t just an investment in their ad platform,” Flynn Zaiger, CEO of social media consultancy Online Optimism, said. “Investing in Meta now appears to be a commitment that you believe the metaverse will eventually replace much of what Internet users are used to.”
Meta’s rebranding comes at a time when politicians and regulators are scrutinising the company for alleged anticompetitive behaviour and the consequences of how it handles toxic or false content on its Facebook and Instagram platforms.