Newly renamed Meta is investing heavily in its futuristic “metaverse” project, but for now, relies on advertising revenue for nearly all its income.
So when it posted sharply higher costs but gave a weak revenue forecast late Wednesday, investors got spooked — and knocked almost $US200 billion ($A281 billion) off the valuation of the company formerly known as Facebook.
It comes as the company is being hauled to court accused by mining magnate Andrew “Twiggy” Forrest of breaching anti-money laundering laws and failing to stop clickbait advertising scams using the Australian businessman’s image.
He believes it’s the first time Facebook, rebranded last year as Meta, has faced criminal charges globally.
The Australian Competition and Consumer Commission is also investigating “misleading” ads which purport to show public figures endorsing schemes that are actually scams.
“While Mr Forrest’s proceedings concern similar advertisements to those that the ACCC is investigating, the ACCC’s investigation is separate and concerns different questions of law,” chair Rod Sims said on Thursday.
Meta’s shares fell 22.6 per cent to $US249.90 ($A350.99) in after-hours trading.
If the drop holds until the market opens Thursday, the company’s overall value, known as its market capitalisation, is on track to drop by a figure greater than the size of the entire Greek economy, based on data from the World Bank.
The metaverse is sort of the internet brought to life, or at least rendered in 3D. Meta CEO Mark Zuckerberg has described it as a “virtual environment” in which you can immerse yourself instead of just staring at a screen.
Theoretically, the metaverse would be a place where people can meet, work and play using virtual reality headsets, augmented reality glasses, smartphone apps or other devices.
But building it is not likely to be cheap.
Meta invested more than $US10 billion ($A14 billion) in its Reality Labs segment — which includes its virtual reality headsets and augmented reality technology — in 2021, contributing to the quarter’s profit decline.
It expanded its workforce by 23 per cent, ending the year with 71,970 employees, mostly in technical roles.
The company also said revenue in the current quarter is likely to come in below market expectations, due in part to growing competition from TikTok and other rival platforms vying for people’s attention. .
People’s changing online behaviour is also limiting Meta’s money-making abilities. More people are watching video, such as Instagram’s Reels (a TikTok clone), and this makes less money than more established features.
The Menlo Park, California, based company said it earned $US10.29 billion ($A14.45 billion), or $US3.67 ($A5.15) per share, in the final three months of 2021.
That’s down 8 per cent from $US11.22 billion ($A15.76 billion), or $US3.88 ($A5.45) per share, in the same period a year earlier. Revenue rose to 20 per cent to $US33.67 billion ($A47.29 billion).
Analysts, on average, were expecting earnings of $US3.85 ($A5.41) per share on revenue of $US33.36 billion ($A46.86 billion), according to a poll by FactSet.
Meta Platforms Inc. took on its new name last autumn to emphasise Zuckerberg’s new focus on the metaverse. Since then, the company has been shifting resources and hiring engineers — including from competitors like Apple and Google — who can help realise his vision.
Zuckerberg is betting that the metaverse will be the next generation of the internet because he thinks it’s going to be a big part of the digital economy.
He expects people to start seeing Meta as a “metaverse company” in the coming years, rather than a social media company.
For now, though, the metaverse exists only as an amorphous idea envisioned — and named — by the science fiction author Neal Stephenson three decades ago.
It’s not yet clear if it’ll be the next iteration of human-computer interaction the way Zuckerberg sees it, or just another playground for techies and gamers.
This could be spooking investors, who tend to prefer immediate, or at least quick, results on investments.
Meta said it expects revenue between $US27 billion ($A38 billion) and $US29 billion ($A41 billion) for the current quarter, below the $US30.2 billion ($A42.4 billion) analysts are forecasting.