Meta’s Mega Market Cap Haircut Speaks Volumes About Metaverse Challenges

Meta, Facebook

It seems, for Big Tech, a lightning trip on the way to, and a swift descent from, from the trillion-dollar mark.

Trillion-dollar market cap, to be exact.

For Meta Platforms (the parent company of Facebook), that milestone seems long ago and far away, a hallmark of positive hallmark of investor sentiment that has evaporated.

For those keeping score, it was just over a year ago that the social media giant traded at such lofty levels, following Apple and Microsoft into the trillion-dollar circle. Looking back, that high-water market came on the heels of the news that a district court in Washington D.C. had dismissed the Federal Trade Commission’s antitrust suit against the firm.

And now, as of this writing, headed into a holiday-shortened trading week, the company’s market cap is roughly half what it was a year ago, at about $420 billion.

What’s happened is … well, a lot.

The company’s name change, to Meta from Facebook, speaks volumes about a roadmap change that has worried and may continue to worry investors. It’s no easy leap from social media to the metaverse.

Crypto? Well, that seems all but moribund, as Libra has effectively come and gone. As reported last week, the company is shutting down its Novi digital wallet. Users have until September to withdraw their balances.

On a larger scale, macro headwinds are taking a toll. The company, as noted this week, has been reducing hiring activity and is leaving at least some positions unfilled.

Read also: Meta Clamps Down as Zuckerberg Tells Team to do More With Less

We contend that slowing down some of this corporate building — especially with engineering positions — winds up slowing initiatives geared toward innovation.

Significant Slowdowns 

And in the meantime, the core businesses — the apps, of course — are facing pressures. In its latest earnings report, we can see that Facebook monthly active users were up only 3% year on year. Total company revenues derived from ad-related revenues were up 6% to just under $27 billion. That’s a far cry from the double-digit growth rates that had been seen in previous quarters and years. It is the ad revenue that ultimately drives the funding of other new (and eventual) businesses. The stock, itself, can be currency, too, where new issuance can bring capital to the corporate coffers. Both avenues of financing the move to the metaverse, as noted above, are not as robust as they once were.

Monetizing WhatsApp may be in the cards, and indeed, at a high level the company is debuting a payments tool for the creators seeking to make the metaverse a reality across the Horizon Worlds platform. The company aims to take a significant cut, at about 50% of sales.

Read also: Meta Opens Its Metaverse Platform to Payments, and It Doesn’t Come Cheap

As for the metaverse itself, the jury is still out as to just when and how and how much traction there will be near term and long term. There’s at least some collaboration afoot: Three dozen companies, ranging from Meta and Microsoft to Alibaba and Ikea, announced the creation of an organization focused on shaping the metaverse and making it interoperable across social media, gaming, payments and the like.

Read more: Is the Metaverse Just the Web Wearing 3D Glasses?

For Meta, at least, the whole thing is shaping up to be a “show me” story — and the market cap haircut belies some healthy skepticism.