Meta Platforms, the main firm of Facebook, has had a terrible year. The market value of the company has been significantly eroded by the 73% reduction in share price this year. Ad expenditure, the main source of income for software behemoth Meta Platforms, has been declining, among other problems.
In light of the current economic climate, it seems likely that Meta Platforms will continue to have a hard time gaining traction. Given the high inflation and potential economic slump, businesses are reluctant to boost their spending on advertising.
But when the economy improves, will Meta Platforms be able to bounce back? Let’s take a look at one possibility and one cause for concern about the future of the company if that possibility comes to pass.
The Green Flag: The Ecosystem Of Meta Platforms
Meta Platforms saw a 4% YoY drop in revenue to $27.7 billion in the third quarter. Sure, external factors had an impact on the company’s revenue growth, but such factors had nothing to do with the firm’s core business.
This includes shifts in the value of several currencies. Meta’s revenue took a noticeable hit as a result of the stronger U.S. dollar.
However, the firm’s advertising division is undoubtedly suffering. When asked about the state of the advertising industry, executives at Meta Platforms expressed concern about the company’s performance.
The good news is that we can probably place the blame on the general economic climate. With its existing large user base, Meta Platforms keeps growing.
That size of ecosystem can’t be found on any other social networking platform. Meta Platforms will also likely keep most of their users, particularly on Facebook and Instagram.
Both services have established themselves as industry leaders, garnering significant audiences. Not only that, but they are also reaping the benefits of the network effect, whereby their worth rises in proportion to the number of people who use them.
Since Facebook facilitates communication between individuals, its popularity increases as more people join the network in the hopes of connecting with more of their personal networks.
When economic conditions improve, Meta Platforms’ advertising company will be in a strong position to bounce back.
The Red Flag: Growing Costs Associated With The Virtual World
Q3 spending for Meta Platforms surged 19% year-over-year to $22.1 billion, which is a significant amount but still lower than the company’s declining sales. Falling sales and increasing costs are bad news for any business.
In addition, the Reality Labs division of Meta Platforms contributes to price hikes. This division of Meta Platforms is responsible for the company’s virtual reality, virtual reality, and metaverse projects.
The Reality Labs division of Meta Platforms lost $3.7 billion in Q3, which is significantly more than the $2.6 billion loss from operations it disclosed in Q3 of 2017. Recall that Meta Platforms rebranded itself to reflect its aspirations to become a metaverse platform.
The possibility exists that the metaverse won’t take off as Meta Platforms anticipate. If it happens, the business will have thrown away a lot of time and cash. Any prospective investor in Meta Platforms must bear this in mind.
Should One Invest In Meta Platforms?
The price of Meta shares has slumped over the past few months, yet its CEO Mark Zuckerberg is still bullish on metaverse.
And even though it’s possible that the company’s profit growth won’t take up until the year after next, it absolutely will once the marketing landscape shifts. The market for online advertising is expected to rise at an annual compounded rate of 14.3% until the year 2027, according to the projections of certain industry analysts.
As the transition to a digital world proceeds, it is quite unlikely that this will be the end of it. The reason is there are so few businesses that can compete with the network of people that Meta Platforms has. Hence, this platform will continue to be a major channel for marketers to target customers.
The corporation is also aiming to monetize its platforms through the use of e-commerce, which has the potential to be a huge opportunity across Instagram as well as the other social media sites and applications that it owns.
What can you tell us about Meta Platforms’ plans for the metaverse? Thankfully, the enormous amount of free cash flow that the corporation generates is assisting in covering its metaverse investments.
In the first 9 months of this year, Meta Platforms had a free cash flow generation of $13.2 billion, despite the fact that this represented a significant decline of almost 49% year over year.
Some trade assistance platforms like bit profit believe that the opportunity presented by the metaverse could be worth a total of one trillion dollars.
It’s possible that Meta Platforms will be one of the most successful businesses to benefit from this, but even if it doesn’t work out as planned or doesn’t live up to expectations, the remainder of the company’s operations will continue to be robust and expand.
Because of this, Meta Platforms continues to be a company that is recommended for purchase, especially at the current levels.
The Silver Lining
The world we exist in is continuously evolving as a result of the development of new ideas. Just a few short years ago, very few of us might have imagined the profound impact that social media would have on the world.
Blockchain technology has made it possible for breakthroughs to occur in many new and previously unexplored areas. Imagine being able to have conversations with companies and their avatars, as well as the ability to purchase and trade any kind of item at any time from any place.
The fate of the Metaverse is going to be determined by how successfully it can satisfy the two fundamental needs that everyone has, which are the need to communicate with others and the need to create things.
It is constantly being developed, and in the not-too-distant future, eCommerce, marketing, and sales decentralized banking, crypto enterprises, and other types of businesses should be ready to utilize the metaverse.
In this 3D universe, users have the ability to buy, sell, and even create their own goods. This online shopping experience is unlike anything else that can be discovered on the internet due to its exceptionally immersive nature.