Meta is in trouble as Mark Zuckerberg bets on the future of the Metaverse. The confusion surrounding the company is somewhat reminiscent of Yahoo. Yahoo, once called the largest Internet company, stumbled in a similar crisis and was unable to recover.
“It’s reasonable to think that Meta is in a crisis like Yahoo once was,” said a tech industry veteran who has worked closely with Meta executives. The company may no longer be as dominant as it has been in the past decade, he said.
match with Yahoo
In the late 1990s and early 2000s, Yahoo was synonymous with Internet searches. However, the emergence of rivals, delays in responding to changes in digital advertising, and the advent of Web 2.0 led to its decline.
Meta is currently facing challenges such as the rise of TikTok (the first true competitor Meta has encountered), the blow from new privacy policies in digital advertising, and the explosion of Web3-related startups and tech.
These new challenges are largely what motivated Meta to turn to the Metaverse. According to Meta, the Metaverse is a digital reality that has the potential to create new markets for digital goods and virtual experiences. Zuckerberg made the move out of fear that the company’s business was plateauing, according to a former Meta executive who recently left.
It doesn’t seem like his fear was just his imagination. Meta reported a 1% decline in revenue in the second quarter of 2022, the first decline since going public.
Advertisers are looking to cut spending on the company as other platforms rise, which is also a first for the company. Advertisers aren’t attracted to the Metaverse initiative to spend more on Meta’s platform. Instead, Meta is facing what Zuckerberg calls one of the most “tough times” in its history, as it cuts spending and curbs hiring.
After interviewing 10 current and former employees, staff inside Meta are concerned that the new bet won’t improve the business. A staff member in one of the company’s most profitable divisions also said the direction of the company was confused after the company’s name was changed from Meta to Meta in October 2021.
“Among the things that have been announced about the Metaverse, there hasn’t been much that you can actually see or touch, and even less that you can use,” said a former employee.
“Failure is unacceptable”
With Zuckerberg steering to the Metaverse, Meta may be working on the hardware and OS necessary to participate in the Metaverse in the future. But even if there is such a possibility, it’s a long way off, and it’s expensive to realize.
In 2021, Meta spent $10 billion on the Metaverse (approximately 1.34 trillion yen, $1 = 134 yen). Even in the meta, this is a lot of money. Also, the metaverse is basically empty at this point, with few users and even less things you can do there. Zuckerberg says the Metaverse is a long-term strategy and will take at least 10 years to complete development.
“Meta has the guts, the capital, and the ability to bring the Metaverse vision to life and become a major player in the space, but there is no room for failure,” said the industry veteran.
Meanwhile, insiders and investors are concerned about the many challenges Meta currently faces. These include looming regulations, competition from TikTok, and a restructuring of the entire advertising infrastructure caused by changes to the privacy policy.
Even in a cash-rich meta, a $10 billion investment is a lot of money.
Some employees are losing confidence in working for the company. Meta’s internal survey, obtained by Insider, shows that fewer employees responded positively to questions such as how they feel about the company’s leadership, whether they intend to stay with the company, and whether they are proud to work for the company. is doing. That’s despite the fact that the company is always “responsive to employee feedback,” according to a spokesperson.
“Meta is obsolete because cultural capital is the most important thing in tech,” he said. is Georgetown University professor Christie Nordheim, who specializes in data and society, marketing and advertising.
Tech giants struggling to find a place in new industry
Meta’s metaverse shift opens “a new chapter,” one that’s more ambitious and social platform agnostic, Zuckerberg said. Even if it makes investors nervous, increases stock price volatility, and costs tens of billions of dollars for years to come.
Rivals such as Apple, Google, and Microsoft are all developing their own Metaverse products, but Meta is still pushing ahead.
“Meta bet their entire fortune on a market that wasn’t their domain,” said the former employee. Ygal Arounian, managing director of Wedbush Securities, also said, “Nothing is certain about meta’s success[in the metaverse]. The company is still strong and dominant. That may not always be the case,” he said.
Many of Meta’s 70,000-plus employees work in the company’s staple products like Facebook, Instagram, and WhatsApp, or in the advertising division that generates most of the company’s revenue. Some of these employees say they don’t quite understand what the metaverse means in their work.
According to a former executive who recently retired from the company, the company is desperately trying to raise awareness about the Metaverse, and “Mark[Zuckerberg]talks about it all the time,” but it’s even percolating into employee work. I don’t think so.
Meta’s hottest commerce division has told employees it has no plans to invest in Metaverse products until at least 2023, according to people familiar with the matter.
“We don’t have a coherent strategy yet, so we don’t know what to offer or what to work on. That’s causing confusion and anxiety,” said a current employee.
But Zuckerberg’s focus is undeniably on the Metaverse, said the former executive. In fact, Zuckerberg, along with Andrew Bosworth, the Chief Technology Officer (CTO) who leads Reality Labs, went through all the new product demos and personally reviewed plans and proposals for Reality Labs partnerships. is said to be under investigation.
“He[Zuckerberg]doesn’t let anyone decide what he wants the company to be like,” said a former executive.
Indelible memories of Yahoo!
Concerns about meta’s strategic shift, which began to rise after the fall of 2021, reached a peak in February 2022. Daily Active Users (DAU) for Meta-owned apps fell slightly quarter-over-quarter for the first time after several flat quarters.
Investors were perplexed that this was the beginning of Yahoo’s long decline. About $230 billion (about 30 trillion yen) was blown out of the meta market cap, marking the largest one-day drop. The stock is slowly recovering, but still hovering around $200, down nearly 50% since September 2021.
Keith Hwang, chief information officer at Selcouth Capital Management, said challenges such as Apple’s changes to its privacy policy, regulations, slowing user growth and the emergence of TikTok. Investors who saw the appearance one after another are expected to suddenly change their view of the meta.
“All of this makes me think that the meta could become like Yahoo once was. TikTok could overtake the meta. But it’s big.” (Huang)
Evercore internet analyst Mark Mahaney wrote in a memo released in February 2022 that the meta-stock collapse was “a growing concern about the company’s long-term fundamental prospects. ”.
“In layman’s terms, the market is questioning whether this company has become Yahoo 3.0,” Mahaney said.
That’s what insiders want to know. A former Meta executive who recently left Meta said his colleagues had been talking about whether the company would follow in the footsteps of Yahoo — for years.
The comparison with Yahoo was mainly due to the outflow of high-level talent, the inability to maintain good relationships with partner companies such as Apple and Google, and the inability to build its own platform.
Relations between Meta and Apple have already soured for several years, he said. A few years ago, Apple even banned Meta from updating its apps more than once every two weeks. Apple’s argument is, “Why do you need to update your apps so often when iOS only updates once a year?”
Still other ex-employees say talent at all levels is leaving the meta, struggling to find talent, and seeing Web3 projects like cryptocurrencies and NFTs as “vanity satisfaction” at best. Point out things that have not been presented. Things like this are spreading the feeling that the meta is past its prime.
“Instagram is the only real value in the company right now. It’s more and more following in the footsteps of Yahoo,” said a former employee.
Instagram and TikTok vie for the most downloaded apps by month, but TikTok was the most downloaded app in 2021.
“Incredible tenacity”
Shifts like the meta are nothing new. Amazon, Disney, IBM and Microsoft have all found success in new industries long after they were founded, said a veteran social media executive. However, not many companies have made such a dramatic shift.
The fact that a lot of Meta’s money is being poured into the Metaverse and Reality Labs can be interpreted as “we know it’s not going to work,” the exec said.
“Social tech companies like this need to invest in increments and see what works.
Many of the world’s most successful companies started out in garages (or dorm rooms in meta’s case). That’s because lack of funding forces founders to make difficult choices about what to do next, the executive said. But Meta has an almost inexhaustible amount of money, and it looks like they’re trying to do it all at once in Web3 and the Metaverse.
COO Sheryl Sandberg (left), who was widely known as No.2 in the meta, also announced that she was leaving the company. A heavy weight fell on Zuckerberg’s shoulders.
Despite his PR and political troubles, Zuckerberg is still widely regarded as a preeminent manager. And it is believed that Zuckerberg needs to remain CEO in order for Meta to rebuild its advertising business, compete with TikTok, and become the flagship of the Metaverse.
“Mark[Zuckerberg]has incredible tenacity. He has the mindset of a founder and authority within the company.
Even if you let outsiders in, Meta would just squeeze the money out of it. If that happens, it will really become the next Yahoo.” (Former executive mentioned above)
In the meta, before scandals, riots, whistleblowers, and calls for regulation, the meta would have simply gone for TikTok, multiple sources say.
Certainly that was the strategy of the previous meta. In order to remain competitive, we were always looking to acquire already popular companies. Instagram, which it acquired for $1 billion in 2012, and WhatsApp, which it acquired for $19 billion in 2014. But “this momentum cannot be replicated,” said the tech executive mentioned at the beginning of this article.
Meta’s acquisition strategy has slowed under increasing pressure from regulators. Zuckerberg is now forced to invent his own TikTok-esque and essentially build the company’s new future from scratch, the exec continued.
Meta has made nearly 100 acquisitions, most of them since 2010, and typically announces seven to eight acquisitions a year. However, it has only made five acquisitions in recent years, and may even be forced to sell Giphy, which it acquired in 2020, after British regulators blocked the acquisition (a Meta spokesperson said: The company is appealing the ruling and seeking a stay of the sale order.)
failure of the past
Meta has the funding and leadership to pursue ambitious new projects. That is the big difference from the declining Yahoo.
Pascal Gauthier, founder of cryptocurrency wallet Ledger and former Yahoo employee, points out:
“Yahoo really should have introduced search sooner, but they didn’t. But Meta is at least trying — even if it burns them.”
However, even if you try, you will not succeed. And Meta has a history of many failed attempts. Facebook Home, Facebook Dating, Deals, Credits, Inbox, Places and more. Oh yeah, there was also Original Shows.
Commerce and shops have been getting a big push over the years, but it’s still not working. Monetization of WhatsApp is only halfway through. The demise of cryptocurrency Diem (formerly Libra) is the latest failure. “Nothing they’ve tried to build on their own has been successful,” said a source familiar with Meta.
Meanwhile, startups like TikTok, which unlike Meta can’t let money do the talking, are being given room to thrive. It may even overtake the meta in the future.
“No matter how big a company, it’s always possible that new technologies and strategists will get in the way, because that’s the natural evolution of tech companies,” says Gautier.
[Original: Facebook is on a Yahoo-like cliff. Insiders and investors fear Mark Zuckerberg’s ‘metaverse’ pivot is an identity crisis the social-media company won’t recover from.]
(Edited by Ayuko Tokiwa)
Source: BusinessInsider
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