Could Facebook follow MySpace?
February 9, 2022
The list of once important but now long forgotten social media sites is long: MySpace, Google Plus, Vine, YikYak, Friendster, Meerkat, Google Wave/Google Buzz, iTunesPing, FriendFeed and DailyBooth to name just a few.
The list is far from exhaustive and there are dozens of other – usually national – sites that have failed or been swamped by new entrants. Could Facebook be joining this list in a world where users are always hyper-fickle, and loyalties are swapped in an afternoon?
The news last week, following on from very unhelpful quarterly numbers and a 21.4 per cent fall in share price value during the week from Facebook prompted numerous comments that the world had reached “peak digital” and that the importance of social media – and its appeal to digital advertisers – was waning. Indeed, it was only a few weeks ago that Mark Zuckerberg changed its name to ‘Meta’ (whatever that means). The subsequent share price collapse at Facebook/Meta was truly staggering and so catastrophic that had the $240 billion loss been measured against a nation’s GDP would have wiped out the annual GDP of all but the top 43 richest countries on the planet.
One commentator compared Zuckerberg as the ‘Ming the Merciless’ of social media. Of course, just hours later Amazon, although with a very different mix of products and services, turned in record numbers. Same with ‘Snap’ (up 27.9 percent). So, who is right?
Analysts at research company MoffettNathanson (MN), in a report to clients, admits that Facebook is suffering some major challenges. MN certainly doesn’t predict the imminent end for Facebook, but is concerned that the company’s recent Q4 /2021 numbers were “terrible” for a more usually high-flying tech stock.
“The incredibly weak 1Q/2022 guide was a headline grabber and not in a good way. As a result of this outlook, we have lowered our 1Q 2022 revenue estimate by nearly -$2 billion and full year 2022 revenues by -$12 billion or -8%,” says MN.
The researchers suggest that TikTok, used by millions of people in Asia and is seemingly popular elsewhere on the planet, is continuing to rise in popularity and in terms of ad-support. Despite its Chinese backing TikTok is not available in China where it is available as Douyin, and is hugely popular.
MN describe TikTok as being the biggest risk to its bullish outlook on Facebook.
The researchers are also worried about rising costs and increased losses at Facebook’s Reality Labs, and suggests that management will either recoup their investment spending, or else close the division down.
MN hold their advice to clients as a “Buy” for Facebook stock but lower their target price by $40 from $420 per share to $380.