Meta had an earnings call this week. Revenues and profit are down. The metaverse division lost $2.8 billion in a single quarter. And Meta CEO Mark Zuckerberg said, regarding the payroll, that there are “probably a bunch of people at the company who shouldn’t be here.”
Here’s why that’s bad news for people using Facebook and Instagram.
How pivots work
Established companies — especially tech companies — need to balance where they invest. Some of their effort goes into their existing business, and some goes into research and development for the future.
In the case of Meta, the existing business is Facebook, Instagram, and WhatsApp. The future is Oculus and the rest of the Metaverse.
A “pivot” is what happens when a company decides that the future products are going to be a lot more important, and the current products are going to be less important.
Pivots are tricky. In general, the future products aren’t ready to generate actual profits yet. And the current products are in the midst of a long, slow decline. That is exactly what is happening at Meta right now.
What this means for your social network experience
You can predict what’s about to happen from observing this pivot, and from experience with past pivots. So expect the following:
- Profit will take a hit, so Meta’s stock price will go down. Facebook and Instagram revenues are declining. This isn’t just recession economics; their user bases are aging, and young people are gravitating to platforms like TikTok. Add in the massive costs of developing metaverse technology and you get a far less profitable Meta. Less profit — along with doubts about the future — causes people to value the company less, and the stock goes down. You might thing this doesn’t matter for your experience — after all, why do you care about the stock price when you’re clicking like on an Instagram post — but consider that the Meta stock price is central to the value of employee stock options. That means that engineers and other professionals will start seeking better compensation at other companies like Apple, TikTok, or whatever the next big thing might be. So you’ll see a brain drain at Meta.
- Meta will put its best engineers into the metaverse division. If you’re the Meta management team, where do you put the talent? You bet on the future, not the past. So you’re going to the most talented engineers to the metaverse team. This will further exacerbate the exodus of talent from the groups that build Facebook and Instagram.
- Advertising clutter on social networks will go up. Consider one ad “avail,” or slot, in a site like Instagram. Now consider what happens when you replace that single avail with two. Let’s say you sold that avail at a $14 CPM (cost per thousand views) and a million people saw it. With two avails, the avails are worth less because of clutter, but let’s peg that decline at 10%. And let’s also assume that people annoyed with ad clutter who leave decrease the traffic by 10%. (Both are probably overestimates.) At a $14 CPM with a million views, you make $14,000 from the single ad. With two ads with a $12.60 CPM with 900,000 views, you make $22,680. You just increased your revenue by 62%. (By the way, this dynamic is why there are so many ads on network TV.) Of course, if you add enough ad clutter, the product becomes unusable. But people take years to get that disgusted. If you’re trashing Facebook and Insta in favor of the metaverse, you don’t care about that long-term future, since by then you’ll be a metaverse company with some crappy social media assets tacked on. Increasing revenue in the short time while trashing the customer experience in the long term is exactly how companies in the midst of a pivot behave.
- Quality of experience will go down. The other way to get more profit out of Facebook and Instagram so you can fund the metaverse is to cut back on spending on the social networks. What costs money? Security. Uptime maintenance. Speed. Moderation. Customer service for advertisers. Continued improvement in the face of changing platform specs. In other words, the world will continue to advance but Facebook and Instagram won’t — in terms of customer experience, they’ll stay put or regress.
- And they’ll copy TikTok. Why are Reels all over Facebook feeds now? Why is Instagram looking like TikTok, with recommended content from people you don’t follow? Because Meta is jealous of TikTok’s users and engagement. If the company was putting its strategic energy behind actually competing, it might come up with something new and imaginative to keep you on its social networks. But all that creative energy is going into the metaverse. The cheapest, easiest, least imaginative way to compete with TikTok is to copy TikTok. So that’s what’s happening. If you don’t like it, they don’t care, because they’re not invested in the long term of Facebook and Instagram anyway.
Users are screwed
Using Facebook and Instagram?
You’re like the people who had Apple IIs when Apple launched the Macintosh.
You’re like the people who got DVDs by mail when Netflix switched to streaming.
You’re being hoist on Meta’s pivot petard. You are a “legacy user.” Things are going to get worse and worse until you leave. And that’s fine with Meta, since they’re only using you to wring as much revenue out of you as they can before you get fed up.
I hope you like going downhill, because all the fun stuff is about to go into the metaverse.