Facebook loses 250 billion in a single day!

Last week Facebook's parent company Meta lost $250B market value in a single day - making it the biggest one-day loss for a US company. Is this a major point of concern for Meta OR just an occasional up & down?

10th February 2022
3 min read

In a nutshell

Last week, Facebook's parent company Meta lost $250B in a single day. Consequently, Meta's shares dropped by 26% & Zuckerberg's net worth fell by $31B.

Over the years, Facebook has always seen steady growth in the number of users. Until the 4th quarter of 2021, when its daily global users fell by 1M. In the bigger scheme of things, that's just a 0.05% drop for Facebook, so why fuss about it?

Well, this drop could probably mean a beginning to continuous decline for Facebook OR it could just be a regular up & down all companies witness.

Now, one reason behind these events could be Apple's new privacy policy. According to the new policy, users have to opt in to getting tracked on their phones. Of course, over 60% of users opted out. As Facebook relies on Ad money, this was a major hit. They lost $10bn in 2021 because of the policy alone.

Additionally, apps like TikTok & YouTube are growing each day to challenge Facebook's once help lead in the social media. Even advertisers have more options to air their advertisements.

With growing competition & Apple's privacy policy, it'll be interesting to see how Facebook tackled these issues. But for now, they have placed their bets on the Metaverse.

Metaverse is a high-risk high-reward scheme and the only other major tech company operating in this space is Microsoft.

Facebook lost over $10 billion on this last year, but it's all insignificant if Facebook's bet plays out well. Of course, only time will tell if the Metaverse becomes a reality and who wins the race. For now, though, Facebook has a bumpy ride ahead.

Last Wednesday, Ambani & Adani overtook Mark Zuckerberg in net wealth, when Zuck's worth dropped by a whopping $31 billion!

Facebook has been facing the heat for a long time now, but last week was a debacle when their shares fell by 26% in a single day 🤯 (even the renaming to "Meta" didn't help much, huh, Zuck?)

No one knows what's in store for FB or Meta in the future, but this great crash sure makes for an interesting story. So read on!

What led to Facebook's loss

Now Facebook has been in the news for all the wrong reasons in the recent years. They have been charged with heavy fines for misusing private user data, and you will often see #deleteFacebook trending.

But the fact remains that Facebook has seen a steady increase in the number of users right from the start. Not a single quarter in 18 years with a dip in daily users.

Until the 4th quarter of 2021 that is. The global daily users fell by 1 million compared to previous quarter and all hell broke loose.

But get this -- Facebook's global daily users fell to 1.929 billion from 1.930 billion in previous quarter. That's a mere 0.05% drop. So why create so much fuss over it?

Well, there are 2 ways to look at this:

  1. This is possibly the beginning of a dark future for Facebook. So the 0.05% drop is a signal that Facebook will see further decline in the coming years.
  2. The stock market is possibly over-reacting. Facebook's family of apps (Facebook, Instagram, Whatsapp etc.) already has a huge user base, and such minor ups & downs are inevitable.

Either way, there's more to the story than just declining users.

Apple's mischievous hand in all of this

Facebook makes money entirely from ads. They know a lot about you, not just based on the information you share through their apps but also from all the activity you do on your phone or computer.

But here's what happened in 2021. Apple launched a new policy where users had to explicitly say YES to tracking & sharing their information.

Well, who would say yes to that. At just the first update of iOS, 62% of users opted out of this tracking!

Of course, Facebook took a real beating. They lost $10bn as a result!

Social media games getting more competitive

Facebook and its family of apps have already made it big in social media. There's no denying that. But there's also stiff competition from TikTok & YouTube.

TikTok, which is just 6 years old, has more than a billion users and is one of Facebook's biggest rivals. Along with YouTube, it pulls in the young crowd and keeps them hooked.

Advertising revenue, as we saw before, has also taken a hit for Facebook. Advertisers in general have many options to choose from now -- TikTok, YouTube, and even e-commerce platforms like Amazon & Walmart.

So clearly just the social media bet may be a risky one for Facebook.

But Zuck isn't as naive as you or me. After all, he bought Instagram in 2012 for just $1 billion, and look how it's become the face of the company now.

So what's next for Facebook

Facebook's big bet is the Metaverse narrative. There are 2 big tech players in this space right now -- Microsoft & Facebook.

Microsoft wants to buildd the Metaverse narrative for virtual offices & collaboration, while Facebook or Meta aims to buildd it with a social angle.

Metaverse is a high risk, high reward bet. And Zuck is clearly all in. They lost over $10 billion on this last year, but it's all insignificant if Facebook's bet plays out well.

Of course, only time will tell if the Metaverse becomes a reality and who wins the race. For now though, Facebook has a bumpy ride ahead.


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Everything is becoming an ad network!

Amazon's ads business has done tremendously well. Now following suit, Walmart is also aiming for a bigger piece of ad revenue. In 2021, Walmart made ~1.5bn surpassing Twitter & Snapchat and doubling its ad business vs 2020.

But the winds are changing in the digital ads market as more & more people are moving towards privacy.

Now with Apple’s privacy policy change, 62% users have opted out of tracking which cost $10bn in revenue for YouTube, Facebook, Twitter & Snapchat in just 6 months 🤯

This works in favour of Amazon and Walmart. All of the data that Amazon & Walmart collect when you shop on their website is completely owned by them. So no privacy change will ever take the data away from these companies.

The data these companies "own" has just become more valuable for ads! So now any company that attracts you to their website and collects your data has the potential to be an ad network.

Ultimately, everything is becoming an advertising network.

How Ads can save Netflix's decline & bring $4B additional revenue!

Netflix is the largest streaming platform in the world! Since its launch in 2007, Netflix has enjoyed a steady increase in both subscribers and revenue. But, it was during the pandemic when they saw exponential growth!

It made ~$30B in revenue while its net income increased by 85% to $5.12B. Additionally, it also added 8.3M paying users in 2021! But, things went south when the pandemic ended.

In the first quarter of 2022, Netflix lost a record 200K subscribers. Its revenue also fell to $7.87B from forecasted $7.93B! They are also expected to lose 2M more subscribers.

So, what is the reason behind this decline?
1. Operations Shutdown in Russia - Caused 700K loss of subscribers
2. Password Sharing - Its 222M subscribers supposedly share their passwords with 100M more users. That's a loss of $1.1B each month!

3. Market Saturation in North America - Netflix has over 75M members here, which is 60% of the households.
4. The India Bet - Netflix wasn't able to make a huge mark in new markets like India!
5. Heavy Competition - More players entering the market like Hulu, Amazon Prime, Disney Plus, Roku, etc

But, what's interesting is that ads could save Netflix! Let's do a little math:
1. ~100M users are accessing Netflix using someone else's account.
2. If it introduces a low cost, ads supported plan:
say, 100M non-users subscribe
giving $40/user of ad revenue (Roku’s proxy)
we get, 100M * $40 ⇒ $4B additional revenue.