Facebook To Metaworse

Metaverse may not be Zuckerberg’s salvation if privacy violation is built into its business model

- Apar Gupta

Over the past week Meta Platforms, which owns and operates Facebook, Instagram and WhatsApp, has taken a big market hit. Its shares dropped 25%, wiping off at least $240 billion off its market capitalisation. As of Monday, this trend continued with another dip of 4.7%, a cumulative stock price fall of 30% since its earnings report for the fourth quarter of 2021.

Is Meta’s share fall a part of the overall bearish market sentiment on global technology companies? No, because the Alphabet-Google stock is down only 1.8% and the Amazon stock, after a drop, is now witnessing a rally. Therefore, markets are sending a bigger message to Meta.

Market analysts have set out two primary reasons for Meta’s challenges. The first is that Facebook has lost roughly half a million users, marking a decline in its global user base for the first time. While this may seem like a blip in the overall number of 1.93 billion active daily users, if this continues as a trend, it will lead to a negative network effect.

The doctrine of network effects says that the value of a communications network is proportional to the square of the number of its connected users. Just as this plays out when most people join social media, a shrinking user base will usually have a compound impact that will spur greater attrition – simply, each person leaving Facebook, prompts another.