FB’s business model is based on surveillance. With Apple and Google curtailing what data can be collected, and with privacy laws in Europe impacting data collection too – FB does not control its destiny regarding the surveillance needed to deliver premium advertising.
This is a serious issue for FB’s business and I would not be long on FB. I do not own any shares of Meta.
This share price collapse will also impact their ability to hire and retain star employees. Couple that with FB and IG having largely saturated their current markets, growth requires new products. Will the metaverse deliver? So far, I am skeptical.
Update from CNBC FB chart on Feb 8, 2022:
- FB share price remains in free fall.
- The recent peak was $344/share and the share price is now down -37% from that recent peak.
- I don’t make share price predictions – but would not be surprised to see FB share price fall quite a bit further before attempting a rebound.
- FB has run into market saturation issues.
- FB no longer has control over its data collection, necessary for its targeted ad platform.
- FB now has competition from new market entrants such as TikTok, GETTR, Rumble – all of which dilute the time available to spend on other social media platforms.
- FB has placed its future growth primarily on the “metaverse”. While there are bona fide good uses of VR, I have doubts that VR helmets will advance to the “VR eyeglass” phase for a couple more years. Difficulties in user input in VR, and difficulties in supporting those who need vision correction lenses, as well as potential usability issues such as headaches and disorientation/dizziness, I am unconvinced that the metaverse is as big as FB thinks it is. In FB’s model, people will live inside the virtual world, wearing VR helmets or glasses, up to 8 hours a day. I am not buying that will work for most people.
- FB’s trailing PE is now in the 15-16 range – which is more typical of a slow growth business. Investors may be looking at the above issues and now view FB has a slow growth stock.
- This share price issue will have impacts on hiring and retaining star employees, and on the ability of FB to acquire other businesses.
- FB needs to identify new growth markets, rapidly – in a world where use of social media may have saturated and may be in decline. I can confirm that there is far less activity in my FB news feed and in my IG news feed, from what I used to see.
Google announces it will introduce similar privacy controls as those offered by Apple, furthering restricting what data FB can collect about users. This confirms my thesis, above, that FB no longer controls its data collection. Share price on February 16 is $214 and falling.