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Facebook was capable of a $1 trillion market cap when the social media platform transformed into Meta, last year. It moved the company into an exclusive territory with a chunk of US tech giants. Now, Meta has lost around two-thirds of its value since getting a boost in September 2021. The company’s stock has found trading at its lowest level since January 2019.

Meta has closed its 3rd consecutive quarter of double-digit percentage drops. However, just 4 stocks in the S&P 500 are experiencing a heightened year. The business of Facebook was constructed on network effects. Users motivated their family members, friends, colleagues, and others. Ultimately, everyone connected in one place including advertisements to generate more profits for the company.

The profit generation enabled Facebook to recruit the best and most dedicated professionals to keep moving the earning cycle effectively. But this cycle has shown a reverse move in 2022 as users were jumping ship and advertisers decreased their spending. It forced Meta to report its 2nd consecutive quarterly drop in revenue. Some businesses found eliminating the social login button of Facebook from their websites.

Metaverse is Consuming Billions of Dollars

However, employment is a growing challenge for most companies. Facebook CEO Mark Zuckerberg spent most of his time promoting the metaverse. It is considered the company’s future but won’t generate revenue in the near term and yearly consume billions of dollars. Zuckerberg claimed the metaverse will reach a billion people within the next decade.

Jim Cramer earlier said the ‘North Star’ is to reach those sorts of figures by the end of the decade. It would hopefully create a much brighter economy around the digital item. However, most investors aren’t surprised about the approach and the channel they are discarding the stock. Facebook isn’t under threat of going out of business because the platform still sustains a dominant position in mobile advertising.

Mobile Advertising is Still a Profitable Business

Keep in mind that mobile advertising has become one of the most profitable business models. But the social platform experienced a 36% decline in net income in the 3rd quarter compared to the previous year. However, Meta obtained $6.7 billion in profit and completed the period with around $40 billion in cash & marketable securities. Meanwhile, the slowest year for the company’s revenue growth was 2020.

The daily active users in the US and Canada have also declined in the last 2 years. These numbers dropped from 198 million in 2020 to 197 million in the 2nd quarter of 2022. FactSet estimated that user numbers are up about 10% and are expected to boost 3% per year till December 2024. However, Meta is looking to represent the success of TikTok with its short-video presentation, Reels.

Meta to Increase the Amount of Short-Video

Moreover, Meta has planned to improve the size of short videos from 15% to 30% in a user’s Instagram feeds. The company will eventually get immense revenue flow with this algorithmic transformation. Facebook dedicated its early days to monitoring Reels. The App Tracking Transparency degraded the ability of Facebook to target users with ads. It reportedly cost the company around $10 billion in revenue in 2022.

Meta is counting on AI-powered advertising to ultimately make amends for Apple’s changes. Zuckerberg isn’t coming across as a leader who seriously changes their culture and transforms a company to step into the future. However, the reputational hit to Meta could also degrade the ability of the company to employ top-level talent. A former Facebook ad executive said TikTok is a Chinese-based company. TikTok now has an edge over Meta when we talk about recruiting.