So long social media, hello meta society. Once a science fiction fantasy, the metaverse has now gone mainstream. The formerly fringe technology is now being explored by several companies, and one of the world’s largest has gone all-in. At an investor conference in late October 2021, Facebook (NASDAQ: FB), Inc.’s corporate parent company rebranded itself as Meta Platforms, Inc., and is somewhat distancing itself from its flagship social media platform.
While the metaverse was already a developing concept, business and financial trends are now colliding at this possibly lucrative frontier.
In addition to the increase of e-commerce and average time spent online, cryptocurrencies saw their market caps reach all-time highs during the COVID-19 pandemic. Investors poured into Bitcoin (BTC) and Ethereum (ETH), marveling at their possibilities for application. What’s more, the NFT (non-fungible token) boom catapulted digital spaces into the limelight, with individuals paying huge amounts of real money for virtual real estate or artwork. The rise of the metaverse was well underway.
The metaverse, as it has been called, is an augmented reality wherein real-life people can interact with each other over several platforms. Likened to being what the internet was meant to be, the opportunities are seemingly endless. Gaming, shopping, working, and yes, socializing, are just some of its main uses.
Users will be able to move about and control their reality with avatars, and several companies will operate platforms as creators and artists fill spaces with content. Art shows, concerts, communal workspaces, game worlds and more will draw users to the developing dimension.
New Multinational Conglomerate on the BlockFacebook, now Meta, had long had an interest in a sort of metaverse reality. It acquired virtual headset and game manufacturer Oculus in 2014, and now will be offering hardware with Meta branding for those who wish to enter the new world.
For weeks prior to its rebranding, Facebook made headlines after an inside whistleblower accused the company of knowingly repressing internal research which proved its detrimental effects on its younger users. The company soon thereafter halted development of an Instagram version for kids and announced a mass deletion of facial recognition data, but denied its platform’s algorithms culpability in targeting users for their feelings of sadness, anger, and fear.
In regard to the shift in focus for the company, the whistleblower, Frances Haugen, called for CEO Mark Zuckerberg to step down as he would not be able to properly lead the company in this new endeavor. In contrast, Zuckerberg was front and center throughout Meta’s first proof of concept videos.
In its initial videos published online, the CEO touted his company's purpose and mission as one which is to help people connect with one another. This is a heartwarming message, but not exactly what brings home the bread, so to speak. Meta generates the majority of its revenues off of advertising spending. The social media and technology giant is one of the best for its targetability of ads to users based on their online behavior and data. While it is unclear how Meta will fully capitalize on its investments in the metaverse, one could assume it would involve targeted ads, and lots of them.
Trading the News Over the last month, capital markets have seen a broad rally led mostly by tech. FB has since underperformed its peers, hampered by negative media reports and uncertainty around its shift in company focus. The firm recently reported earnings generally above Wall Street consensus estimates, which was a relief to investors after Snap (SNAP) cited Apple’s (AAPL) iOS 14.5 privacy changes as a reason for decreased ad revenue.
Now that its earnings are out and the rebrand has been announced, where is Meta stock headed? Using TipRanks’ Website Traffic tool, a downtrend can be identified. Quarter-over-quarter, all-device estimated traffic to facebook.com has declined –2.87%, with the share price falling –2.39% over the same period. When comparing the year-to-date periods of 2020 and 2021, estimated visits to the website are down –2.99%.
When looking at the statistics from September 2020 to September 2021, visits fell by –18.84%. Although the pandemic elevated social media usage across the board, Meta has been unable to retain much of that traffic as mobility increased.
This article was written in cooperation with TipRanks - Stock Market Research & Analysis