Meta (Facebook) (NASDAQ: FB) is on course to see more than $175bn wiped off its value after a catastrophically received set of quarterly results.
The social media giant’s shares are down by more than 20% in premarket trading after quarterly earnings showed EPS missed expectations and future revenues looking on course to fall short. This all comes as the company’s flagship social media brand saw daily active users fall for the first time in its history.
The poor results have sent other social media outfits’ share prices tumbling lower, with Twitter (NYSE: TWTR), Snap (NYSE: SNAP), Bumble (NASDAQ: BMBL) and Pinterest (NYSE: PINS) all in the premarket doldrums.
Facebook misses expectations
The company earned $10.29bn in the final three months of 2021, amounting to $3.67 per share. This falls short of analyst expectations of earnings per share of $3.85, according to FactSet polling.
However, revenue did better, climbing by 20% against the same period in 2020 to reach $33.67bn. This was ahead of the $33.36bn revenue expected by analysts polled on FactSet.
Looking ahead to the next quarter, the company said it expects to achieve revenue of $27-29bn, which represents 3-11% year-over-year growth, but a decline from its fourth quarter sales. Additionally, it falls well short of the $30bn that analysts were expecting for the period.
However, it isn’t simply money which tells the story of why investors have been spooked by the company’s earnings.
Facebook losing young users
Zuckerberg warned that the company’s sales growth has been damaged by users, particularly younger generations, leaving Facebook in favour of its rivals.
This has led to the first drop in daily active users in the social media giant’s history.
This looks like the culmination of a trend that has been developing over the last few years. Back in 2018, Pew Research noted that the number of teens who said they used Facebook had fallen from 71% to 51% over the last three years. The same research found the platform was less popular than YouTube, Snapchat and Instagram among teenagers.
Now that the ultra-popular Tik Tok has been added to the mix, attracting younger users is even more challenging for Facebook.
Meta has not been oblivious to this issue. Mark Zuckerberg himself commented that he wanted to make "serving young adults the north star” after the company released its third quarter earnings back in October 2021.
The company said it expects continued competition for people’s time and engagement in the coming quarter. Additionally, it cautioned that users’ time on its apps was shifting further towards short video content like its Reels, which monetize at lower rates than features like the newsfeed and stories.
Even so, it’s worth noting that Meta’s daily active users, which totalled 1.93 billion during the quarter, were still up by 5% compared to the same period 12 months prior. It’s only compared to the third quarter that usership has fallen, and even then only marginally.
This doesn’t mean the drop is a one off, but it puts in perspective the massive amount of users that Facebook still attracts.
Facebook remains key
But does the social media side of Meta still matter? We all saw Mark Zuckerberg’s infamous metaverse presentation and are aware of the company’s pivot towards the virtual reality space.
The company even changed its name from Facebook to Meta Platforms Inc.
The problem is, for all Zuckerberg’s efforts in making the company about the metaverse, the Facebook app and the company’s other social media sites are still very much the mothership.
Revenue from these apps came in at $32.8bn for the three-month period ended 31 December, compared to just $877m in revenue from Reality Labs, the company’s augmented and virtual reality reporting segment.
This is growth of 22% from the same period in 2020, but remains a drop in the ocean when stacked against the company’s other streams.
The company’s metaverse ambitions are exciting, but they are still a long way off supporting the business as a whole. That’s why waning interest in Meta’s social media offerings is of such concern to investors.
Away from the news of waning usership, Meta used the results as a chance to confirm that the company’s ticker will be changing from FB to META at some point in the first six months of 2022, reflecting the company’s name change from Facebook.