Meta earnings presentation Q1 2022 [pdf]
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Compare that to services that FB runs that have years of your personal history carefully cataloged in it - that data can be exported, but there aren't many services where it can be richly imported.
Both companies may seem to be are in fragile positions because of their size and public opinion but I wouldn't bet either of them will shutter their doors anytime soon.
they simply use both. That is what I have observed.
i'm saving the url of your comment and i will add a reminder in 3 months to comment on this article.
i fear you will lose your money and the stock will not be at that level but lets wait and see.
Some gone, some still alive but all of them had what's FB's primary moat: network effect.
It's a strong moat but once things start to move to the wrong direction things can move fast... unlike with Walmart.
Facebook's moat is that it's the Yellow Pages of social.
It took the web to kill Yellow Pages, not a better phone book. Which is probably why you see FB investing in acquiring social-but-different competitors and researching paradigm shifts.
I'm sure no where near where facebook is with negative perception but it seems like small businesses at least could have viewed the yellow pages as problematic.
Stalin used to say that quantity has a quality all its own.
The world has changed. Even if Facebook decays, it could decay over literal decades, still being profitable. Yahoo is still around ($1.3bn in revenue), IBM is still around, SUSE is still around.
We only talk about the cool tip of the iceberg but IT/tech/software is huge.
Also, Facebook has been around for about 18 years now. Myspace was a major player for like 4 years.
- $10 billion to Reality Labs R&D in 2021 expected to increase annually will eat into earnings
- Last year saw first ever decline in US Facebook user base, expected to continue shrinking (albeit slowly)
- Apple’s 2021 opt-in privacy change makes FB/Insta/Messenger/WhatsApp ads less effective permanently for the highest margin demographic (iPhone users)
- Hugely negative public sentiment* hurts adoption and makes continued litigation headwinds likely
* to be clear, I think the negative sentiment is unfair towards Meta. You use their service and in exchange they show you ads based on your behavior. They’ve always been transparent about that, there’s nothing particularly secretive or nefarious going on.
Ads power most of the free internet stuff we enjoy. YouTube, Snap, Google search, Tiktok, they all do the same thing! But people for whatever reason really seethe when it comes to Mark Zuckerberg and FB.
In fact, it’s pretty insane that TikTok isn’t under more scrutiny in the US from a national security perspective. At least the other ad-powered entertainment apps aren’t controlled by a foreign adversary!
Other than selling data and ads to foreign groups that use it for electioneering / sowing domestic discord. Minor detail though, I’m sure.
They also made it way harder to run political ads after public sentiment changed in 2016.
You can go buy an ad from them right now. So can “foreign groups.” Neither of you will get access to anyone’s data.
Same goes for YouTube, Twitter, Snap, etc.
If you’re worried about “foreign groups” there’s this Chinese app called TikTok that knows everything about every American under 30 that no one seems to be concerned about.
You're using the current supposed state as if it excuses or negates previous behavior. It doesn't. Facebook has sold data in the recent past. https://www.bbc.com/news/technology-46618582
> If you’re worried about “foreign groups” there’s this Chinese app called TikTok that knows everything about every American under 30 that no one seems to be concerned about.
That's just whataboutism
Seems like that is a knob that can be changed at any time to give more profit.
> - Last year saw first ever decline in US Facebook user base, expected to continue shrinking (albeit slowly)
Including instagram? Regardless, this was right after the pandemic, some people will switch from screens.
> - Apple’s 2021 opt-in privacy change makes FB/Insta/Messenger/WhatsApp ads less effective permanently for the highest margin demographic (iPhone users)
This will be worked around - the impact isn't as large as people make it out to be.
> - Hugely negative public sentiment* hurts adoption and makes continued litigation headwinds likely
Doesn't seem to really be hurting IG adoption that much. The real risk is litigation.
Add in WhatsApp’s under-monetization and some bullishness on VR and you’ve got my investment thesis.
> This will be worked around - the impact isn't as large as people make it out to be.
And you think Apple will stay put and do nothing? You can expect that as soon as they find a work around, Apple is gonna screw them again. They have no chances.
But they can use data from Android to infer user behavior for Apple users.
Also, they can still use tracking data from their own properties (IG, FB, Whatsapp).
Will they go bankrupt ? I don't think so. Will they be able to grow at the rate of the last 10y? I don't think so.
I think they peaked already.
Are we just making things up now? FB users increased over the last quarter and are at an all-time high.
https://blog.google/products/android/introducing-privacy-san...
Google is doing this because it is like throwing a banana in Mario kart for your competitors to slip on.
I'm personally just not concerned about being represented by a user ID in a database with info attached to it. Every service I've ever used has this on me and in general I trust US-run public companies with that level of data.
Tech businesses more than most! Equifax leaked my personal info lol, no Silicon Valley companies have.
I don’t necessarily disagree with the sentiment, just trying to provide some perspective.
It's one thing to buy the stock and be bullish, and another to turn a blind eye to the horrors this company has created.
Youtube has it's problems, Google Search is going down the drain, and a ton of other websites run off ad revenue, yes. Those services are not responsible for organizing genocides, providing political analytics companies access to unauthorized data, or running unethical experiments on users to test their impact on the users' mental health.
Some people don't. Social media is a mirror.
People aren't zombies - you're not powerless before an omnipotent algorithm.
You have to make a deliberate effort to not interact with polarizing content. Facebook constantly puts poisoned bait in your feed in the hopes you get hooked. Happy people don't engage as much as angry people. Seniors who don't have an IT background, children who don't have enough common sense, poor people who don't have enough education to know Facebook tracks 50K+ traits to better manipulate your behavior, etc.
It looks like you're not considering all the different kinds of users of Facebook in all countries where it operates. You can start looking at funny memes and slowly end up with paid divisive government propaganda.
Social media exploits human behavior, often in the worst ways. You say people aren't zombies, but people aren't rational actors, either, they are people. Human behavior lies somewhere in between zombie and rational actor, rarely completely at one extreme. This is where the responsibility of a megacorp controlling the world's largest social media platform comes in. People can have their behavior manipulated on these platforms, and advertising is the proof - why would advertisers spend if it didn't work?
Social media is definitely more than a mirror, and FB deserves the general negative sentiment it gets because it consistently fails to self regulate in the interest of its users or the general public. FB has two objective functions due to its corporate structure: 1) shareholder profit; 2) Zuckerberg's agenda (currently the Metaverse, previously user growth).
Given the consequences, Facebook should dedicate resources to prevent it from happening again.
- 2020, Facebook announced it won't fact-check political ads during the looming election.
- 2020, ex-Facebook data scientist Sophie Zhang revealed inner practices profiting from political disinformation and manipulation.
- 2021, ex-Facebook employee Frances Haugen leaks documents revealing unethical business practices for profit.
Given Facebook's rotten practices, seems it will give us at least one major scandal per year, but without serious consequences so don't sell your stocks.
This is the big one, and it was a bona fide scandal.
That said it happened in 2016, the story broke in 2018. Cambridge Analytica was very clearly the bad actor here, they took advantage of a too-permissive FB API that was patched.
Facebook was rightly fined for negligence.
> 2020, Facebook announced it won't fact-check political ads
This is not a scandal lol.
Ad platforms are under no obligation to fact-check political ads. Quite the opposite - federal law prohibits television broadcasters from refusing to run an ad from from a qualified political candidate for any reason!
Google does not fact check any ads. Remember those insane Tai Lopez Youtube ads?
> 2020, ex-Facebook data scientist Sophie Zhang revealed inner practices profiting from political disinformation and manipulation.
I hadn't heard of this one. From Wikipedia:
>>> Zhang reported that most of these subversive networks use Facebook's organization pages, configured with human names and photographs to mimic human accounts in order to successfully evade Facebook's emerging efforts to counter fake users.
She was on a team dedicated to stopping stuff like this, and she reported that people were figuring out ways around their automation? That's the point of the team! Staying ahead of bad actors!
> 2021, ex-Facebook employee Frances Haugen leaks documents revealing unethical business practices for profit.
Lots of allegations here, no legal consequences (unlike Cambridge Analytica which resulted in billions in fines). Similar to the Zhang story, the whole claim is "Facebook should be doing more than it already does to combat the bad actions of others" not "Facebook is actively doing bad stuff."
From Wikipedia:
>>> Haugen told The Guardian she was motivated to focus her work at Facebook on addressing misinformation because of her experience with losing a friend... after the friend visited online forums and became a proponent of conspiratorial beliefs that included white nationalism and the occult.
>>> In December 2021, Little, Brown & Company announced a book deal with Haugen for her memoir... After leaving Facebook, Haugen relocated to Puerto Rico, and has invested in a cryptocurrency company.
Do with that info what you will.
2020-present: Facebook enables ethnic cleansing in the Tigray region of Ethiopia.
2.9b DAU.
It's far more difficult to prove specific effects of social media use, because it's so hard to separate it from all other social and economic dynamics of our time. There's no proper control group.
The way in which different people use social media may well make all the difference between it being beneficial and being harmful. Social media is not a substance that has a specific effect regardless of how we use it as individuals and as a society.
I think it's a mistake to expect social sciences to work like natural sciences.
The smoking gun you're hoping for may never be found. The entire question could end up in the same basket as worries about the alleged harmfulness of reading novels or comic books, watching TV, watching porn or playing computer games. If anything "social media" seems even more vague than all of these.
How do you define a growth stock?
Revenue growth is stopping, no way they’re going to that level anytime soon. Also, if a recession is coming, as some say with interest rates rising, ad expenditure will fall, affecting Meta greatly.
OTOH, it has a moat from its network effect and its earnings are insane in absolute terms, so could also pivot to become a nice cash cow instead of a growth stock in the coming years.
Google is growing its top line over 20% YoY and has a PE of 20. What PE would you give another business that sell ads but has a stagnating top line? Probably much less than 20.
Zuck seems pretty all in on VR, and if they actually get it somewhere good the financial reward is insane.
I have no way to gauge how long his interest will last. I also have my doubts it is even possible to get it somewhere good with our current level of technology —- in short I think we need some kind of low latency neural link that doesn’t require brain surgery. Anything controller or machine vision based will never be good enough for mass market (i.e. smartphone level) appeal.
Conversely how many original Meta products are successes? Messenger is the only one that I can think of.
That's why the P/E is so low - because people are discounting future earnings by a lot because over the next 5 years there are about 3 big threats that are going to eat away at that revenue stream. (1: High value users leaving, 2: Regulatory pressure, 3: Massive spending on a new unproven business)
1) The market seems saturated, and users are starting to slip away. If it ever loses critical mass, it collapses.
2) Facebook can't execute complex technical plans anymore. It's investing billions into a risky new area -- the metaversa -- with nothing to show for it.
3) The internal culture focuses on politics and pet projects. It's not a bad backstabbing politics -- it's a great place to work -- but it's just not aligned to business success. Most Metamates want to do fun, interesting things, with little connection to business success.
4) Costs are out-of-control, and decoupled from revenue. Revenue is high, so it's not a pain point right now, but that decoupling will lead to massive pain once things go south.
I would short Facebook, but I don't know how long the "long term" is. I don't think it's at a risk of becoming MySpace, but I suspect it will go the way of AOL at some point. I still know older people with @aol.com emails, but it's not worth a lot and no longer relevant.
It feels brittle -- once things start to unravel, they'll continue to do so very quickly. It needs a good tipping point, whether that's a scandal, a new regulation, or whatever.
The "business" relies on people allowing the company to do stuff that if the people were given a conscious choice, they would generally not allow. This number of people that would not agree to let the company surveil them is not only large but it is increasing.
Revenues and earnings:
- Daily Active Users 1.96BN, beating Est. of 1.94BN, up 4% Y/Y
- Monthly Active Users 2.94BN, missing Est. 2.95BN, up 3% Y/Y
- EPS $2.72, beating estimate $2.56
- Revenue $27.91 billion, beating estimate $28.24 billion (Bloomberg Consensus)
- Advertising rev. $27.00 billion, missing estimate $27.48 billion
- Family of Apps revenue $27.21 billion, missing estimate $27.52 billion
- Reality Labs revenue $695 million, beating estimate $677.1 million
- Other revenue $215 million, beating estimate $189.3 million
A red flag here: yes, revenue grew 7% YY, but that was the slowest pace of growth since the company went public in 2012. Meanwhile, US revenue barely grew in Q1 at $12.671BN, up from $12.405 BN.
On $3B loss. Insane R&D spend for CV ;)
I think people are really underestimating how much impact these technologies are going to have. People thought the first iPhone was only good for fart apps. I think this will be a similar story.
I just hope someone can compete with FB.
they won't even recommend it as safe for kids that age yet, so it isn't surprising you couldn't find any games targeted to that age range.
You should be aware there are some potentially scary things going on in any of the social apps [0]
[0] https://www.theguardian.com/tv-and-radio/2022/apr/25/a-barra...
Which is half the problem. The other half of the problem is that Facebook is actively pushing developers to social-enable their games by integrating Facebook based social features into them (hence the mandatory Facebook account). So even games that have no reason to be using those features are seeing them added.
Upgrade the strap, it's a much better experience.
My nieces and nephews are all around that age, I usually let them play Job Simulator. They love it.
But I am excited for what's going to come, now that VR is getting some serious investment.
My wishlist:
- no motion sickness or headaches (not sure if this is going to be possible for 100% of people)And, with time, I'd like to see hardware become less expensive, giving it a chance to become more mainstream.
We can do this right now on the Index. You need:
- A computer that can output 144 fps consistently without drops.
- Well-positioned lighthouses.
- Software that only moves the virtual world in response to the player moving in the real world (except via blink teleportation).
Unseen Diplomacy, The Lab, and Half Life Alyx, when played with the right settings or hardware, should make basically no one motion sick.
Unfortunately, people don't like blink teleportation because it usually sucks. Games like Unseen Diplomacy are able to create large spaces without teleportation, but have pretty large play space requirements. IMO, there's room for more creativity in this space. Budget Cuts, for example, manages to make blink teleportation really work.
I wanted to go deeper (esp. with VRChat) so I eventually caved in to free movement. It was very motion sickness inducing at first, but doing it bit by bit you get used to it after a while.
Personal recommendation for any VR experience: I have a bar stool in my VR space where I can lie on or just sit. The difference from a chair is that it doesn't offset you vertically when you lie/sit, which tends to mess with games.
Tiny note, snap turn can cause motion sickness! (And even personally, I have friends who get motion sick from it.) It's obviously better than "smooth turning", but just changing the direction can be disorienting. There's really no replacement for 360 degree tracking.
I loathe Facebook, and use their products only when absolutely necessary.
But after reading a comment on HN about value the Quest 2 delivers for exercise, I decided to give it a go. I had and used the Oculus DK1 but had done zero VR since.
> I think people are really underestimating how much impact these technologies are going to have.
Unquestionably. People are totally underestimating VR/AR.
> I just hope someone can compete with FB.
I think FB will be competing with Snap, Samsung/Microsoft and others for the Android market.
If you use the Oculus in a room with Siri enabled (via homepod / smarthome stuff like fans / lights) it becomes obvious the experience must stretch beyond the headset.
Facebook has neither the privacy track record nor smarthome footprint needed to support this. Though Oculus will have existed first, and FB may get an improved headset to market out in the meantime, Apple will create the market expectations for VR/AR
Furthermore, Apple is really well positioned for AR, which may be more adoptable than full on VR. iPhones already have had pretty good AR capabilities built in and Apple has really just been developing the technology probably to ultimately integrate it into the rumored headset.
Fair, but I was meaning more of what's coming down the pipeline. Five to ten years of Meta money committed to the "metaverse" - the might address some of those issues ("no-one else is on it" probably being one of them)
> Furthermore, Apple is really well positioned for AR, which may be more adoptable than full on VR
Maybe? No-one's seen their rumoured device. Meta's way ahead in terms of actual adoption today (even if it's VR and not AR). I hope Apple does something awesome, but it remains to be seen. And it's hard to imagine the Oculus team at Meta couldn't do AR if they were asked to.
> they are going to control the platform of the future and set their own rules.
This.
Lots of people are overlooking this part of Meta and they are quite far ahead with XR.
That
I do think Meta is completely wasting its time with it's current approach of trying to re-invent Facebook inside the Metaverse. Hopefully they get past that sooner rather than later. But I have no doubt this is going to be an extremely important platform in the future and other than Apple if they ever show up, it's very hard to see anybody catching Meta.
Google says Apple AirPods are responsible for $23 billion in revenue, or 23x Reality Labs. It's running laps around Meta, in reality.
But maybe Zuck knows about some forthcoming propaganda campaign to focus on getting people to use VR to distract from income inequality, putting the majority of the population into the digital world seems like the best way to distract from real world issues
Because while the adults are all busy pooh-poohing it, this tech is rapidly penetrating in that market. Which is to say, something like 80% of my kids friends have access to / use VR routinely. And it's 100% Oculus/Meta.
So far I haven't seen a compelling mass market use case outside of games (which is a relatively niche market), but if you open up development tools well I suppose the hope is that someone will come up with something.
Indeed, this is the billion dollar question. It's very clear there are compelling use cases but the really obvious ones are niche industrial uses, commercial applications etc. So the real question is compelling mass market use cases.
The two mass market ones that are apparent at the moment are fitness and virtual office spaces. Fitness is already well on the way, virtual office use is still tenuous and really needs hardware improvements to get off the ground. Those improvements look likely in the next generation of hardware so it's going to be an interesting 24 months to see whether it takes off or not.
The elephant in the room, as you point out, is that neither of these match Faceook's supposed aspiration to create a Metaverse. So I see Facebook/Meta's ultimate success here being dictated heavily by how fast they can get over that and target the real mass market use cases as their primary focus.
This is what FB did during one the Nets games.
https://www.youtube.com/watch?v=pq4JMWcnUCw
Just look at the comment and you tell people are interested, If they can improve the quality on this. This will be a huge for sports fans, especially fans in different countries/states that can't go to the games.
Now expand this across music events and other events. You have a massive TAM.
I imagine they can decide to dial down efforts to detect bots/fake profiles and more or less hit the numbers they want.
If ads aren’t effective businesses will stop buying them.
Fake clicks will always result in a no-purchase, and therefore would devalue FB’s offering in the #1 metric ad buyers care about.
Not to mention that would be fraudulent behavior and they’d be opening themselves up to huge litigation risk.
Let's say FB has 200 million bots. Do you think businesses could tell that there's actually 1.7b users and not 1.9b?
But I'm curious to learn what you mean! I have no direct ad purchasing experience
For a crude yardstick during a growth phase, sure. For measuring the long term health of a mature business, nope.
Is that a mistake? How does getting less than the estimate constitute beating it?
Seems like lots of gamblers got wiped out after this earnings result thinking that Meta was finished.
In this case the tables have turned and it is not over yet.
Main product has tanked. So few people use it extensively now.
Instagram has been absolutely destroyed by tik tok. As that audience grows up, the impact of that colossal defeat will hurt more and more.
Buying another success will be near impossible, and they’ve not created anything significant since the original app. No reason to expect them to successfully build something as difficult as a VR platform.
They’ve had years to fix the above. They haven’t. Whilst that doesn’t matter for their current earnings, the future looks very bleak, especially when the next recession hits and advertising spend plummets.
I do wonder at what point Zuck will step away. I guess sidewards to avoid spooking investors but he’s smart, he knows it’s over.
I doubt you have a good enough holistic overview.
I've been downvoted for my analysis but absolutely stand by it and want to double-down for the record, as I think HN is very wrong about this.
Worth noting that Facebook's stock is now less than 50% of its peak price, and we're in a bull market. How is that going to look when the recession hits?
Whilst I'm sure it will continue to rake in cash for a few years, my point is that the gradient is severely negative and it will accelerate. Tik Tok will overtake Instagram this year, despite the fact that its audience haven't even reach 25 yet. That's _already baked in_ to the demographics.
The only way I'm wrong is if Facebook make a big success with a new product in-house, which they have never done. I believe they don't have the ability to do it. Their hiring and their culture are the problem, and you just can't fix culture overnight (esp with the original founder at the helm).
Facebook are not Microsoft, Google, or Amazon. They don't have the same culture. The reason they're in the same bracket is their financial success, but it's not an appropriate comparison.
Facebook's numbers are great: https://www.statista.com/statistics/277229/facebooks-annual-...
They will probably slow down, but that's a few years in the future. Meta is #34 on the Fortune500, by the time they slow down they could be #20, who knows, #10.
That's more than enough to live on for decades. And there's more than enough time to get a new CEO, etc.
There is no reason to expect growth better than the Nasdaq composite for the foreseeable future.
1) Due to ownership structure and personalities, the path to new ideas through leadership is closed. Zuckerberg is not going to change or leave if Meta disappoints in the future.
2) Meta can't by market share anymore thanks to regulators in all major markets being finally awake, led by EU. The benefit of using size as leverage is dwindling.
3) Meta has never created major new innovation/product in-house after Facebook. Metaverse is extremely unlikely to succeed against competition. Discount fruitless R&D from profits.
4) Meta continues to make money due to network effect, economies of size. Meta is like an oil company pumping until Facebook + Instagram well runs dry.
Nothing in Meta's VR research is something that competitors can't do. It's just basic incremental improvement you get by throwing money into it.
That's a massive hindrance for innovation and my #1 argument above. No matter how much he throws money and hires people, it's still just this same guy and the same viewpoint.
Ability to innovate is not function of money and resources.
Not sure what you're alluding to by his viewpoint, but his company has a userbase of over 3.5B which is the vast majority of the internet connected population of the world (excluding China, for obvious reasons). You might not like him, but he knows how to drive adoption.
I guess, previously they bought some growing/upcoming competitors. Can they satisfy regulators and buy up new innovative companies with complementary rather than competing offerings?
Complementary companies integrated into data-driven economies of scale are still targets for regulators.
The Quest 2 is honestly pretty amazing, especially for its price point.
As for the metaverse - which competition do you specifically see beating Facebook?
As of March 31, 2022, FB had $29.41 billion available and authorized for repurchases.
If your goal is to thwart software monopolies (a pretty low impact use of FTC time imo) Google search or Visa & Mastercard (duopoly) should be a much higher priority.
The social externalities piece gets into philosophical territory. We "protect" people from cigarettes by taxing them heavily. Yet lots of people still choose to use them. Some would argue we should do the same for social media, others would argue that individuals should be free to decide for themselves. Still others would argue that comparing the health impact of cigarettes to that of social media is ridiculous.
IMO disincentivizing carbon emissions is a much more clear-cut externality to fight against!
They also share what they know about you (used for ad purposes) and you can control (delete) that data: https://www.facebook.com/about/basics
* Earnings per share: $2.72 vs $2.56 expected
* Revenue: $27.91 billion vs $28.2 billion expected
* Daily Active Users (DAUs): 1.96 billion vs 1.95 billion expected
* Monthly Active Users (MAUs): 2.94 billion vs 2.97 billion expected
* Average Revenue per User (ARPU): $9.54 vs. $9.50 expected
20Q4 21Q1 % 21Q4 22Q1 %
2512 2434 -0.031 3220 2949 -0.084 Other
4703 4735 0.007 6183 5661 -0.084 Asia
6822 6373 -0.066 8174 6364 -0.221 Europe
13150 11897 -0.095 15062 12024 -0.202 US Can
FB isn't delivering great stats when it comes to the stock market, but their profit margins remain pretty insane.
14th page – Europe MAUs = 418M
(I looked at Asia-Pacific and was perplexed.)