- $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.
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.
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.
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.
How do you define a growth stock?
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.
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.
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.
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.