Meta-morphosis or More Pain? Possible Futures for Facebook’s Parent Company

Estract from Wall Street Journal link

Meta Platforms is facing all kinds of headwinds—from flat user growth to $10 billion in lost revenue this year alone from Apple’s privacy changes. Realizing its transformative goal may depend on successfully building a whole new business for itself.

It wasn’t that long ago that Facebook META -4.58% seemed to be riding high—with its ad-driven money machine still humming and a valuation that, as recently as September, topped $1 trillion.

Facebook’s parent company, Meta Platforms, is today the poster child of the tech reckoning. And, more so than its fellow tech giants, Meta’s fate in the long run is anyone’s guess. Which makes it an interesting time to ponder how much longer its travails will last, and what it might look like on the other side.

While the shares of all tech companies have been hammered lately, the underlying profit machines for Apple, Microsoft, Google and Amazon suggest that they will weather the current economic, regulatory, and other challenges.

Meta, on the other hand, seems to be genuinely threatened in the near term by several factors that could hurt its revenue and reach. The first is aggressive regulation—new and pending, from the Federal Trade Commission and the European Union, and perhaps even Congress. The second is the impact on its advertising model of Apple’s privacy changes—and the prospect that Google might be following Apple’s example for its Android mobile operating system. The third is the rapid growth of TikTok, as well as a handful of other growing competitors that are siphoning away Facebook’s youngest users and challenging it for the attention of its older ones. And the fourth is that Meta is making a huge bet—to the tune of nearly $10 billion in R&D a year—on building an entirely new business for itself, the metaverse, that might not pan out.

It’s not as if Meta’s competitors aren’t facing some of the same challenges—Google, especially, is facing even more heat from regulators than Facebook. But no other company of its size is facing so many challenges at once.

Uncertain future

As part of its efforts to continue growing, Meta recently started distributing its AI engineers to product teams, rather than centralizing them all in a research lab. While AI is relevant to any number of things the company does, ad targeting remains an important one. Facebook’s ability to micro-target ads—which can make it seem like our phones are listening to us even when they aren’t—depends not just on how much data the company can gather on us, but its ability to use AI to match us to other consumers like us.

Other efforts by Meta include pushing advertisers to build shops within Instagram and Facebook. This effort is in its early days, and some retailers have complained about the results. Retail that happens within Meta’s own sites and apps helps the company to gather the data its AI needs to target ads and complete sales, making up for data lost to device-makers’ privacy changes.

Meta’s costly investment in new virtual- and mixed-reality headsets—that is, ones that combine VR and the real world—will yield many new opportunities to gather data on us, and could even allow even more efficient ad targeting, says Amy Webb, an author, professor at NYU’s Stern School of Business and a self-described “quantitative futurist.”

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