Up 17% in AH, on top of huge gains over the past 2 months. Nuts. It looks like it really wants to get back to $300+ It shows how all this talk about metaverse losses was overblown. This is why my best piece of financial advice is to tune out the media. By the time something is a narrative, it's too late. If the media is talking about how Facebook peaked or is the next myspace, this is time to buy. Same for Netflix.
Metaverse notwithstanding, Facebook and Instagram are still huge cash cows. Ad CPCs are really high, especially mobile ads. Companies, especially in financial services and healthcare, paying so much $ for clicks to target older people, retirees, etc. and also people with medical problems. Obesity epidemic means more healthcare spending, same for people living longer.
It feels like only 3 months ago I was repeatedly trying to convince HN readers that Meta was a great investment opportunity at a P/E of 9. In fact, it was…:
In the last 3 months the entire market has come back up. I have safe agricultural stocks that have risen nearly as much in this time. FB bouncing back and having a low PE doesn't make it a good investment. People are looking longterm at their prospects and where they're dumping their cash and they don't like it.
This argument is equivalent to saying "Someone told me that Russian Roulette is dangerous, but I didn't die when I played it, so they're wrong."
Systematic risks are still risks even if they don't manifest and if you want to argue Paul Graham is wrong you have to argue why the risks aren't risks.
(I don't know what risks he pointed out, so I don't know whether I think he's right or not)
In your view, in what sense are alternative outcomes are actually statistically probably. It sounds to me like you're saying:
when the tweet was made the universe was about to make a dice roll. There was a probability that bitcoin went down and a probability that bitcoin went to the current price, and the universe rolled and happened to land on the current state, but the others could also have happened if luck had gone another way?
I'm not sure why you're trying to pigeonhole my world view into a dice roll example. The core point I'm making is that something doesn't become "not a risk" just because you didn't fail.
If we're talking about the dice roll example, just because your rolled a six, it doesn't mean that rolling specifically a six wasn't more unlikely than rolling a number from 1 to 5. Which means that if you planned (either explicitly or implicitly) on things working out in a way equivalent to rolling a 6, then your plan was risky.
Yes, I am doubting that big events in the economy function like dice rolls. When you say it's a tail risk, you're talking as if that outcome is actually realizable.
This viewpoint renders the word "risk" meaningless. Something isn't a risk if there isn't some sequence of events that can cause it to happen.
And even if we lived in a deterministic universe, we don't have perfect information, so we cannot know the outcome of big events. Our best way to deal with them is to model things probabilistically based on what we do know and make our choices based on based on risk/reward.
I'm also not sure where you're getting the phrase "tail risk", I didn't even know what the term meant much less used it.
I agree that risk is about lack of information. So I don't think PG could have been right. He has his view of the market, and other people have theirs. Turns out, he was missing a lot of information.
I guess I can see some crazy combination of physical objects colliding and nobody being able to predict where they land, I'm just not sure thats the right model for valuation of an asset.
> tail risk
Sorry if I introduced that. I just meant that it's occurrence far outside of the regular distribution.
The point about systemic risks is they don’t go away just because they haven’t happened yet.
For example, Bitcoin is up, as are most investments. It’s unfortunately also correlated in the other direction with the stock market so if the market tanks next month so does Bitcoin. But the link doesn’t go away if the stock market is fine, so Bitcoin could also crash in 2 months when the market tanks, or in X months… aka the risk is from the correlation not the short term outcome.
As to predictions, the best evidence we have is the universe isn’t deterministic. Quantium mechanics has everything rolling dice. So saying X didn’t happen therefore X couldn’t have happened appears to be inconsistent with how reality actually operates.
The quantum mechanics is a cop out, since everything observable at the scale of our lives is compatible with a determinism. Only experiments at microscopic level can falsify it.
> The point about systemic risks is they don’t go away just because they haven’t happened yet.
I agree. But observing a state of instability or unpredictability is different than saying "X economic event a 10% chance of happening".
You said there way no way to predict they could buy back so much.
But basing your expectations on 2021 would have done exactly that. So that argument is wrong.
If your real/amended argument is "no way to predict the level", as in predicting the exact amount, that's a much weaker argument that has barely any ramifications for investing. The specific amount is generally much less important than going over/under some threshold.
If it was so obvious large quantities of the stock would’ve been purchased even if the price was depressed. Were there any notable investors purchasing large quantities in expectation of this?
Predicting it only took very simple and reasonable logic. "I bet the number stays the same."
A sports analogy: There's a game tomorrow where one team has 30% odds of winning. If someone bets on that team, nobody says "no one could have predicted that". It's obvious that it could happen, and it's plausible that it could happen. Tons of people predicted it.
And large quantities of the stock were purchased. There's tons of trading happening every day.
It's not like the people that expected a large buyback were acting in a vacuum. Stock value follows the average. To push the sports analogy, the team stock would still be going down even though many people are betting on them.
They barely bought more than last Q (500M more) and 3 times less than Q4-21. Nothing extraordinary with this buyback, they even have a few B authorized remaining.
The only surprise with the buyback streak since last year is how poorly executed it was. They dumped $45B ahead of anouncing a decrease in DAU, then trickled after it tanked the stock.
Markets measure the tiny fraction of buyers and sellers on a given day and ignore the super majority of holders. It almost feels like length of ownership should be more determinative of price movements than anything else. If long-term holders start selling, it’s concerning.
> Markets measure the tiny fraction of buyers and sellers on a given day and ignore the super majority of holders.
Not really. The decision to not sell and to not buy is itself reflective of the price. If a stock is super cheap, people will buy. If the stock is priced fairly or overpriced, few people will buy. Same goes for selling.
It almost feels like length of ownership should be more determinative of price movements than anything else.
>> Length of ownership AND relatedly original cost basis. I think a lot of stocks can seem to defy gravity (i.e. high PE and/or high P/FCF) when the founder and the early investors HODL stocks. At $0.0001 per share, HODLing (in say TSLA, META, MSFT, BTC) is easy since there is/was no upfront capital paid in and holding has essentially no cost basis - so there's no need to act like rationally like a later stage investor.
>> Founders and early investors can easily own up to 30-50% of the company and really its only when the founder retires/starts diversifying and the founder and early investors start to unload - does price discovery occur on the entirety of the shares outstanding.[1][2][3]
Agree. I think that fully explains all of TSLA’s movement. Mostly HODL but then Elon had to sell into light purchasing. Since he stopped, purchasing again outpaces selling so we get a steady rise.
(Edit: I would have referred to the company as Meta, like you did, but “the Meta comment” could have been confusing, even with the capitalized letter.)
Markets aren’t efficient. People are biased and can’t look past them.
I think they are efficient most of the time, but there are edge cases that allow for higher risk-adjusted returns than predicted by a purely efficient framework. A notable example is Renaissance Technologies.
Buying back another $40 billion in stock also helps. The narrative around metaverse costs was largely that they should return cash to shareholders rather than dumping so much of it into that incinerator. It looks like the board took that advice.
> rather than dumping so much of it into that incinerator.
It's strange to me that people think Reality Labs is an incinerator. Truly, without exaggeration, I think this entire perception is based on the ridiculous early Horizon Worlds screenshots Mark Zuckerberg posted, which did a ton of damage to Meta.
But Horizon Worlds is not The Metaverse, and it's not Reality Labs! It's one part of it. Reality Labs has game studios, the leading VR/AR hardware, all kinds of software packages to make working in the Metaverse possible, like Horizon Workrooms, Horizon Remote Desktop, and quite a bit more. They are quickly developing a fairly insurmountable moat.
Meanwhile, Apple is also dumping billions into AR, but they don't break it out in earnings reports, so no one talks about it.
There are lots of execution risks in Meta's VR strategy. Obviously, if no one ever wants their products for games, work, entertainment, or whatever else, then they will have incinerated an awful lot of money. But I think that's actually the unlikely scenario.
The quarterly losses are very large, but it's an entirely new product line with a very large potential market.
Horizon Worlds is what Meta chose to showcase, so it’s pretty reasonable to draw the conclusion that it’s the best they can do right now.
The screenshots you’re talking about are of Zuckerberg trying to gin up enthusiasm for the product.
The insurmountable most is surrounding a space that doesn’t make any money. Apple may be investing in AR but they didn’t signal that they are betting the company on it
To abuse the metaphor a bit, incinerators generate energy. It's entirely possible that Zuck and Co. have been capturing the energy produced by this one in order to help propel the company forward in the future.
> But I think that's actually the unlikely scenario.
Right, we take opposite sides of the probability here. My preference is just that they direct some of the output from that prodigious cash-generator towards shareholders in the meantime. You know, like Apple does.
I don't think it's about tax advantages but flexibility for the conpany. RSUs usually vest over several years. If times get tough you can slow/stop buybacks. Eventually that would have an effect on the price from dilution but it'd be slow. You can't just not pay out cash awards that have already been scheduled (unless you opt for layoffs, but that's a big hammer).
Meta share count is only down 6% total since the start of the pandemic. And down ~10% total since their share count peak in 2017
Looks like you're referencing YoY rates as measured on a quarterly basis from the link above, which is not the same as the absolute percentage of shares.
Likely the pace will rise somewhat with recent job cuts/buybacks, but historically they've mostly just tread water with shares issued via software based comp
As of December 31, 2020, there were 2,406 million shares of Class A common stock and 443 million shares of Class B common stock issued and outstanding.
As of December 31, 2021, there were 2,328 million shares of Class A common stock and 413 million shares of Class B common stock issued and outstanding.
2021: 2849 -> 2741
We don't have the end of year figures yet but from the Q3 report:
2,248,672,204 shares outstanding as of October 21, 2022
402,876,470 shares outstanding as of October 21, 2022
Class A shares [...] 2,262 million [...] outstanding, as of September 30, 2022
Class B shares [...] 403 million [...] outstanding, as of September 30, 2022
and from yesterday's earnings release:
Weighted-average shares used to compute earnings per share attributable to Class A and Class B common stockholders (Three Months Ended December 31, 2022): Basic 2,638
While we wait for the filing we can take a guess:
Sep 30: 2665
Oct 21: 2652
Q4 average: 2638
Dec 31: ~2615 ?
> As of December 31, 2022, there were 2,247 million shares of Class A common stock and 367 million shares of Class B common stock issued and outstanding.
2614. Not bad!
8.2% fewer outstanding shares than two years ago. If that’s “mostly flat” so be it.
On a yearly basis they are still down about 4% in revenue from advertising and apps and down 17% in the reality labs section. Their business is just shrinking less quickly than investors feared.
in constant currency they would be up about 4%. the biggest trend is revenue per ad was nearly offset by growth in number of ads - the latter is likely to hit its limit sooner than the former and that seems like the biggest risk to the business
My only concern is that cost per ad was down 22% this quarter. They counteracted by showing 17% more ads on minimal user growth which seems likely to accelerate Facebook exodus.
I bought a small amount of META when the narrative of its downfall hit its peak. It’s the first individual stock I’ve bought in 12 years. I’m now going to be up about 60%.
This is why it's really hard to win big buying individual stocks. You finally pulled the trigger, and you won, but you never even had a chance to make more than a small gain.
Say you even bought $100k, which is probably much more than most mere mortals have the stomach to "place a bet" with. You'd be up 60k, which is great, but probably not life changing. And now you have to decide if you want to cash it out or let it ride and risk losing it.
On the other hand, it doesn't take much intestinal fortitude to park 100k in VTSAX and sleep well every night.
Right, but my original point was that no normal person (including OP) dares to take such a risk with a single stock, so in real life there is no "equivalent amount of S&P" in the equation.
I said months ago when they announced layoffs that Meta is fine. They are a literal cash volcano. Zucks foray into the metaverse to the tune of 10B/year is dumb, but it's a cash expense. Eventually he'll tone that investment down and that expense will flow right to the bottom line. Full disclosure, I am long Meta.
I followed as NFLX dropped, and it was definitely a media narrative before the drop was over. We don't know where things will shake out, of course, but it's not the case that everything is priced in by the time the media starts talking about it.
> This is why my best piece of financial advice is to tune out the media.
I'm trying very hard to not say 'I told them so'.
In fact, I said this before here [0] [1] [2] too many times to stop listening to the nonsense from the media. Meta has lots of cash to last for another decade and they are still printing money.
Such calls for the death of Meta Platforms on HN and in the media has once again always been greatly exaggerated.
Their infra is more expensive- all content is decent quality video instead of text and fairly low res images - and from what I can tell the ad network is not very robust. Not too surprising
Or price discovery in US markets is completely broken. Could also explain it.
Mumbles something about perpetual FTDs, naked shorting, the biggest market maker also being a hedge fund (who donates many millions to corrupt politcians), tokenized securities that can be used as short locates and so on...
Citadel securities (the largest retail market maker, this is the company front-running every single one of your trades through PFOF if you use a "free" broker like Robin Hood)
Citadel LLC (the hedge fund)
Both part of Citadel the mother ship. All owned by 1 man (who like Madoff owns a hedge fund and a market maker, but unlike Madoff actually seems to execute trades with his hedge fund).
Kind of old, but still relevant (not much changed since then). The same documentary makers are working on a new one that I believe will come out this year. There's tons of info to find online if you Google any of those terms in my rant from the previous comment as well.
PS: those are just tips of multiple icebergs, there's more.
Yeah it’s huge. Lots of small niche businesses in our area lost their route for finding new customers (General advertising too expensive for their market demo.).
I’m not sure where that tangent came from but that certainly wouldn’t be the lesson learned.
The lesson learned is that these small “brands” that can only exist due to adware (fake demand) will eventually be culled by increases in prices or de-amplification of their products.
If your “brand” is one of these then you should be learning that you need to actually make a good product at a good price that doesn’t rely on advertising to succeed in your marketplace. Otherwise you are always at risk of being squeezed and potentially shut down.
Many (certainly not all) of these companies are parasites in that the rely on Meta to utilize algorithms to get you addicted and alter your purchasing habits. They don’t actually offer a good product at a good price, they offer copies of other products with different labels, or in some cases outright, disposable junk.
I'm being serious. The competitive nature that you mention proves the point. Don't compete.
Are you a local coffee shop or clothing designer? Why would you be advertising on Facebook when you should be partnering with a local news site or city/town interest site, or going to meetups, or sponsoring local events?
Relying on Facebook ads builds artificial demand, subjects you to extreme competition, and ultimately either you have to spend too much to maintain or you eventually lose customers because the only reason they were interested in your product was the ads in the first place. Live by the ad, die by the ad.
> you should be partnering with a local news site or city/town interest site, or going to meetups, or sponsoring local events?
All of that is advertising.
I was replying to this:
> If your “brand” is one of these then you should be learning that you need to actually make a good product at a good price that doesn’t rely on advertising to succeed in your marketplace.
They did, but the explosion of very specific businesses is almost entirely down to Google and Facebook changing the cost structure for these businesses by providing global advertising reach for companies that are small but have products that can be purchased anywhere.
of all the brands, apple cult brand is the strongest, it's hard to argue when it's already spelled out word per word in their leak internal memos that their intention to stop tracking was because they wanted a cut of FB's ad revenue.
Their execution under the guise of caring for user privacy is a master class though, it's impeccably done, there should be a case study done about this.
The philosophical lesson is that certain businesses just can’t exist without targeted advertisements, and that society might decide that is a price they are willing to pay.
This feels like a cheap take. Consider any number of small businesses just starting out (a local juice bar, a fitness service, a mobile app, a game...). They have a good product that makes their customers happy. The problem is they only have 5 customers and that won't pay the bills. They could hope that they just get lucky and people just discover them (it happens but its rare), or they can go out and promote their product. So they invest in marketing and sometimes this means buying ads. Can this business exist without targeted ads? Of course it can, but the odds are stacked against them. Saying they can't exist is an exaggeration.
This is why I don’t understand people who are criticizing the pivot. Why focus on revenue that won’t be there if you don’t have your own dedicated hardware platform?
Yes, XR as a whole has a long way to go still, but it’s obvious that it’s the future
The main effect of that button is blocking the measurement of whether your ad click turned into a purchase, which is important because pricing ads based on conversions is more efficient than charging for impressions or clicks.
“Relevant” ads are sort of a red herring. Ad personalization matters, but commercially it’s less important than conversion measurement. Notably, Apple asks for permission before showing personalized ads, but never asks for permission to track conversions (while blocking competitors from tracking conversions by default).
Less targeted ads are less likely to psychologically manipulate me in to spending money. I'd like an option to only show me ads I have no chance of spending money for.
It speaks to how good targeted adtech is. When I don't give them unlimited access to my metadata, the ad quality plummets. They really can give you "good" ads if you let them. But now they have to waste money on untargeted ads for me lmao.
> objectively this means you still get ads just less releavnt ones, no?
business might choose to not show ads at all vs showing irrlevent ads. Surely there is a downside and risk to showing ads, a risk that cannot be taken willy nilly.
Costs went up a lot, primarily from increased payroll. That's why they did a big layoff, although I believe they still have more employees than end of 2021 even after that.
Yea, I think the point-in-time, annualized R&D expense on 2023/03 will be the midpoint of the reported figure for 2022 and 20221. (~$30bn, where EOY 2022 was $35bn and EOY 2021 was $24.6bn).
The layoff, we can imagine, impacted maybe 15% of R&D at most.
It might still be too high in 2023, depending on what their revenue figures do in Q1/Q2. Would be interesting if they needed to do another layoff -- doesn't seem outside the realm of possibility.
covid happened, money was printed to replace lost wages but somehow it trickled up
plus people couldn't leave their house so tech companies saw booms in sales/revenue
so then inflation happened to the tune of 8% and the narrative was "if you didn't get at least an 8% raise 2019 -> 2020 -> 2021 each year you basically got a paycut"
and now we're seeing layoffs that basically feel like a reaction/counterbalance to any inflation rasies (or hires) that were given/made
"if a tree falls in the woods and nobody is around to hear it"
"if you get an inflation-sized big raise but then get laid off, did you really get a raise at all?"
Hrm, no. The $40bn they announced is forward-looking guidance for 2023. In 2022 they repurchased $28bn (2021 they repurchased $44bn) [1].
Not sure that I'd call this "admitting defeat on growth" as other people have said elsewhere in this thread, given that they've done buybacks of this magnitude before.
The main issue, it seems, is that they grew expenditures on cost of revenue and R&D (i.e. operations and capex), but revenue (advertising from family of apps, whatever revenue VR yields) did not keep pace -- in fact, it was flat on a YoY basis [2].
IMO, this doc is strong evidence that the layoffs were a bona fide good idea. Will be interesting to compare to Alphabet's tomorrow.
Hard to predict and I’m not sure of the timeline of purchases, but 40B was 10% of their market cap at closing, which is kinda bonkers. So naively at least a 10% jump.
Question for folks here: what is the bull case for Meta remaining a growth stock, given the current regulatory environment and uncertainty around the medium-term prospects of VR as an "attention" category?
More concretely, what is the scenario for META going back to "good ol' days of" mid-20%, low-30% YoY quarterly revenue growth, given mounting regulatory and privacy barriers that are largely beyond their ability to exert influence/control?
Context is they're on a streak of 4 quarters of <10% YoY quarterly growth for the first time in their history. Last three quarters were basically air-balls (flat / slightly-negative).
- They have the worlds largest messaging platform (WhatsApp) that is basically unmonetized rn.
- They are one of 3-5 major players in AI. Amazon was one of the 3-5 largest internet companies... and then created AWS. (e.g., they released-then-unreleased a GPT3 clone before ChatGPT, because they got slammed in the press for ethics. doesn't mean they can't build a B2B business with it.)
- The regulatory landscape is shifting towards tech nationalism. Yea, there'll be regulation, but nationalism will limit the scope + create a moat against upstarts.
Recessions are great times to build new businesses - if you have cash on hand. They have cash.
It's not clear it's even possible to effectively monetize pure messaging platforms like WhatsApp - there aren't many successful examples of highly monetized chat apps. Chat is pretty much the hardest thing in all of social networking to monetize and there is no guarantee Facebook can effectively monetize WhatsApp without sabotaging its primary purpose (communication). IMO there is a reason WhatsApp is still basically unmonetized right now.
How does Facebook stand to monetize from AI? AWS and Google monetize through their cloud offerings, but Facebook went the library/framework route with PyTorch. That seems like a big question mark if they can capitalize on AI in some form outside of their own internal systems (like ad optimization and general monetization/product improvements, which everyone is doing at the same time).
They have a ton of cash, but can they effectively use it? They are burning a lot of it on VR which isn't catching on the way they envisioned. Facebook is at a point where they are already huge so to maintain 'growth stock' valuations they have to keep delivering quarter over quarter results that move the needle in the billions and billions of dollars. I don't see a compelling case for them to do that based on these pillars.
> It's not clear it's even possible to effectively monetize pure messaging platforms like WhatsApp
Well, WhatsApp is moving beyond "pure" messaging with payments and commerce (Eg: JioMart integration in India).
Another approach would be to compare with wechat with 1.2 billion active users generating an estimated 15+ Billion in revenue in 2021 (https://www.businessofapps.com/data/wechat-statistics/) without much North America / EU presence and being banned in India.
I don't know if we can draw much from the comparison to WeChat.
WeChat is effectively an operating system for the domestic Chinese economy within a single app, it's 10-100x more complex than a messaging app, and it enjoys official blessing that WhatsApp would never obtain in any market. You can hardly survive in China without WeChat, it's so tightly integrated into everyday life.
They could monetize AI by using it to boost their own properties.
For instance they could replace human content moderators, which is costing them billions. Maybe offer some "Meta premium" which summarizes and lets you ask questions about your WhatsApp, messenger chats. Perhaps improve ad targeting by understanding user post content better?
At current price, Facebook doesn't have to remain a growth stock. It's trading at a 15 P/E multiple. For comparison Proctor and Gamble is trading at a 25 P/E, Coca Cola at 26 P/E, and Comcast at 33 P/E. For Facebook to go up (at least relative to prevailing American equity valuations), it just has to remain a blue chip marquee name and not go into terminal decline.
They're currently priced at 3.5x annualized revenue. If you assume they could capture 20% of that revenue consistently, that's 20x annualized profits (equivalent to 13ish years of profit on this basis).
To me, this seems close to the max price I'd value Meta, given the headwinds to growth they face.
The inability to grow via acquisition seems like a big hurdle -- that's what I was hinting at with "regulatory pressure".
To me, I think the bull case is that they come out with an Apple-tier-quality headset, thereby begetting and capturing the mainstream headset market from a data privacy point of view, and that this new market is additive or multiplicative to their core ads business, rather than cannibalizing (an idea that is, itself, suspect).
IDK. If I bought at $90 (which I didn't, somewhat foolishly in hindsight), I'd feel pretty comfortable selling at the current after-market price.
I have two rules personally - don't invest in highly speculative assets, don't invest short term.
So I am out of $META in general, as it fails the test on both prongs for me. It is highly volatile at the moment, and if I think 10 years into the future, the only reason I can think of for them being around is "network effects". Compared to something like $NVDA, that is just a weak argument in my opinion.
Yes! Sorry didn't mean to sound like I was disagreeing, I was more just riffing on what you said. More riffing below :)
I think $META will continue to win the "social network" game on any computing platform into the foreseeable future, as that's their "unreasonable" competency. i.e. Even if Apple wins the VR hardware game, Meta has an unfair advantage at developing the most popular social media app on that platform.
However, I struggle to see a narrative where the capturable value of that social media landscape increases at growth stock rates into the distant future, given the fact that any VR winner other than Meta is liable to create a more-private-by-default computing platform than previous platforms of computing (this seems to be a secular trend).
So, even if Meta controls the same percentage of the "social media advertising" market into the transition to VR, I could see this being a smaller TAM than "social media advertising" is at (now-peak) web 2.0.
That is, it seems like their only hope to remain a growth stock to become the "Apple of VR", which seems to be squarely outside their circle of competency.
All in all, I'd agree with you and put META in the "too hard" / "probably not" category at current price. Although, even with these uncertainties, $90 was a no-brainer in retrospect (even assuming permanently-flat revenue). With perfect hindsight, I would have bought then and probably sold at $120, although that's all hot air (X
I think the question of "what is the value of non-targeted ads / contextual ads", "what is the risk of an aging population", "how to price tiktok risk" are all also a part of it.
The issue I have with them is that social media is quite a shaky thing on the long run - every generation is pretty much resetting the whole game, so to speak (i.e. your network effects might matter for existing groups but not for the new ones).
This, combined with economic uncertainty, makes me think "if the stock tanks for a relatively long period of time, what is the inherent value that gives me trust that they will recover?"
I think even for pure software companies, META is quite susceptible to disruption in this regard.
Not to mention, if Zuck decided to double down on his doubling down, he could have. Then we would have seen even lower numbers than 90. Since unlike other companies, META lacks checks and balances, that is also another point to be worried about, if you want to invest for long term.
I'm more talking about the fact that, if there were a new Instagram or WhatsApp for VR that threatened their social media hegemony, Meta would most certainly be blocked from acquiring it. Especially because it seems the current FTC regrets that previous FTC administrations green-lit the WhatsApp and Instagram acquisitions.
The Within case isn't informative, IMO -- Within wasn't building social media applications. It was more a case of an acquihire. The VR ecosystem is too early to have an Instagram/WhatsApp moment, yet.
I still believe long term that XR will replace or augment our smart phones. Apple will make it socially acceptable and meta will capitalize on selling it to the mid to low end of the market.
You know Meta has the best tech in terms of AI/ML right? They just need a new leadership focus to steer the company in the right direction. They literally have all the tools to lead in that area.
In a broad investment sense. Sure there will be other niches.
But just like Mobile phones and Servers were the twin tech platforms till 2020 that delivers all of digital value. That paradigm will shift to MR and Cloud.
If we are all going to live in a Metaverse, you need a MR device to deliver that experience to the user and Cloud to centralize/distribute those experiences.
Besides food (and physical healthcare) and a climate-controlled 20 x 20 space, you don't need the real world (atoms). All your experiences will be delivered through bits.
It's largely worse from the outside because meta has no goodwill to make mistakes and iterate in public. GPT-2/3 were just as bad at hallucination, if not worse. That doesn't mean that meta isn't iterating on their LLM in private using the 3b users and armies of labelers to fine-tune and improve their model.
From what I understand, they have one of the strongest translation models at scale, and their recommendation models for advertising are likely only rivaled by Google or Bytedance
All those models are only as good as the data they’re trained on. Google and Meta both have the most relevant proprietary data that cannot be rivaled. Not even close.
This depends on what are you training the model for. Arguably wikipedia is a much better dataset for all things related to real world and history than Fb’s feed or activities or a bunch of websites optimized for SEO.
This is easily illustrated by ChatGPT not being Google or Meta and doing a pretty great job with available sources.
As an encyclopedia sure wikipedia is great but the type of data Google and Meta has is totally different. Basically a real time feed of who is talking to who about what, and what people are searching for. Totally different applications
My personal bet is that the tech giants are immune from US regulation. Hurting a tech giant just means that that market position goes to Asia, most likely China.
Modern investing isn't about evaluating a company's products or services, it's about making increasingly-outrageous claims in order to take advantage of the human tendency to fail to exercise skepticism for sufficently-outrageous lies. The goal is to create a fanatical religion of financial death-cultists who will endlessly proselytize in the pursuit of a promised "to the moon" event, in the same way that Heaven's Gate believed that UFOs would swoop down and take them to heaven.
So, indeed, by 2035 we can accurately predict that half of all global GDP will be in Facebook, half will be in Tesla, the other half will be tied up in Bitcoin, and the rest of the world economy (who probably aren't doing anything important anyway) will fight over the fourth half.
There's 122 waking hours in a week, so by way of example: the USA's workforce of 155 million (much smaller than the population as a whole) does an average of 35 hours per week, which means the entire productive output of the economy is squeezed into 12.9% of the entire population's waking hours.
Some of the non-productive time involves other people getting paid, but (excluding taxes and rent which I don't think make a difference in this scenario) not all of it.
Also think about how Linux and Wikipedia are free even if your internet connection and device(s) aren't.
Like, the real world exists, just outside the door. I think VR advocates possibly are inclined to overestimate just how much people will like VR. It seems fairly plausible that it remains a niche hobby.
At the end of the day, attention is all that matters and the most valuable commodity.
Current social media captures only 10% of all human experiences that are possible in the Metaverse. We haven't even fully tapped 7 Billion people's productivity and wealth (even in the current mobile world). So, the potential is 200b * 1000 in about 13 years
but where does the 500x come from? 2x for population....and then you assume that social media is 10% of the world experience....not by reckoning. they capture....a pittance of the experience. they are like wakes in the wave....the wave is the experience, the wake is social media. Due to attention issues and limits on multitasking...how much can we honestly expand...c'mon. 10x sure....maybe even 20x....so a 4T market?
People will spend at least 4 hours or 25% of their waking hours in Metaverse (It'll be more, but I'm being conservative), at least $20 Trillion of human activity will occur in Metaverse (because bits are cheaper than atoms)
Well that is a thesis. I disagree with most of your thesis, though world gdp at $200T i do agree with.
But I appreciate you trying to lay it out, i'd say metaverse spending will be less than 2% at that time. Most of the world wont' even be near the meta verse in 10 years.
Rich people who can take vacations, go to concerts, eat at restaurants, hang out with friends, afford to play golf, tennis and a decent home of course want to live in the real world.
There are 7 Billion other people who would love to have that same experience even if it's virtual for the same price as a mobile phone.
I don’t think your view is all that privileged. I just simply disagree that poor people will spend money in any meaningful way in the meta verse.
I mean think this through, you can’t even pay for the basics of life like food and shelter, and you’re going to dump 25% of your spending on the meta verse?
I mean, I’m guessing you don’t yet have a family as once you do you’ll realize you’ll spend most of your money providing for them and not on virtual fun.
But far away the least amount of money to spend. Surely you can see that?
it throws off your entire thesis. If in your dystopian future, after the necessities of life are taken care of and yo have no money how will any percent of GDP be spent in the metaverse
No one seems to be talking about thr $40B stock buyback authorization just announced. I'm neither a fan nor a detractor of META, but think with eps growth so negative and such high losses, perhaps stock price increases are partially due to the promise of buybacks from an elastic market.
It's an absolutely great idea if they can get to real eps growth over the next 3 or 6 months. I would flip bearish if they can't get to positive eps growth in 6 months.
I don't have any META in my portfolio, just making an observation.
Meta has always been immensely profitable. It was hit this year because investors didn’t like how hard mark was going into the reality labs stuff and that also reminded them that he can do whatever the hell he wants, including making no money for extended periods of time. Their recent layoffs and this reports continued capex cuts show that mark is committed to keeping his investors happy which is why we’re seeing the bounce back.
They deliver more ads today than they have at any point in their history. That's a function of active users, and of their UX. The instagram/fb experience of today is not anything like it was 5 years ago -- there are a lot more ads.
At the same time, more people are "using" their family of apps in one way or another on a daily or monthly basis. These metrics entail all kinds of flaws, but ads delivered and ad impressions are the metric that explain the phenomenon you describe, more than net-new users.
That being said, yes, international expansion is a big deal for how they grow the "user" count metrics.
What I've come to realize is that everyone likes to say they stopped using it, but the reality is that they actually do still use FB. They just aren't as active posting their own updates. But they are engaging in the platform, comments, etc. FBs got a long way to go before the golden goose is actually at risk.
Younger people not using FB though seems pretty real.
> What I've come to realize is that everyone likes to say they stopped using it, but the reality is that they actually do still use FB. They just aren't as active posting their own updates.
You could be right, but I think it’s more so that our specific circles may actually have stopped using it while most folks, in general, remain users.
> Younger people not using FB though seems pretty real.
We've already gone through one cycle of "young people are abandoning Facebook" with millenials and Snapchat. And it turned out that the thesis of Snapchat as FB killer was widely overblown. Snapchat failed to really expand into other demos the way early Facebook did, not to mention a lot of those Millenials aged out of it and migrated to Instagram.
Now we're hearing the same story but with Gen Z and TikTok. But it's hard to see a compelling reason why TikTok will wind up a different story. Seems very unlikely that my kids pre-school will eventually wind up uploading to TikTok the way they do Facebook.
My guess is the youth vanguard will always use whatever the new hotness is in alternative social media platform, because keeping grownups out is the point. But Facebook (and Instagram) seem like they're firmly entrenched as the base layer of civil society.
You don't know anyone on Instagram? That seems very unlikely. And yes, the United States only supplies a quarter of a billion of Facebook's/Instagram's three billion users.
If you ever download or upload a picture in the app, you’ve likely granted full access to your photo library, which includes location information on every photo along with timestamps.
Also just direct location access, even when it’s running in the background.
What orientation the phone is in (are you laying in bed?) and is it moving?
Then of course more specific metrics within the platform around how long you looked at a post, how fast do you scroll here, how much do you read certain comments compared to others, etc. Those platform metrics are a lot easier to track when you have full hardware access instead of just the apis that mobile javascript provides
Seemed obvious to lots of people who live in reality.
There's definitely a weird echo chamber on HN that decries FB along the lines of "Oh no one I know uses it, therefore why does it exist", meanwhile 2bil+ people are using FB apps every day.
Always makes me laugh when I see those ridiculous statements - there's even one in the comments here!
I don't think so. I think this might be just another signal to other profitable companies that tightening your belt (even though you are making absurd money) is rewarded. Tight focus by Meta and better than expected performance of increased ad load has paid off.
- $40B share bye back, far better than spending on the meta verse and an admission growth is over
- note to above, check out their existing cash on hand
- VR lost $4.2B, come on guys on revenue of $700M, again, come on guys get someone who knows what they are doing running this area
- 86,500 employees, I'm guessing alot of these are in recruitment, content moderation, etc
- laid off/fired 13% of workforce so far this running year
- daily users of more than 2B, wow, growth of 5% yoy, that is good
- shares up 15% probably alot to do with the Fed and tax loss selling holding period being over, so people putting this trade back on
- Total restructuring charges recorded under our FoA segment were $3.76 billion and RL segment were $440 million during the fourth quarter of 202 (FOA is family of applications and RL is reality lab). not sure what those charges are for, look into this.
- on adds, from Bloomberg reporting "Ad impressions increased by 18% while average price per ad decreased by 16% for 2022."
- So the add number they can game went up and the one affected by market force went down.
Thoughts:
- attempting to come back form Q2 and Q3 yoy decrease in revenue
- watch ad revenue, snap was down on large ad revenue declines. FB should be the same given they are in the same ad markets
- how often is tiktok mentioned by FB, or will they continue to pretend they have no competitors?
- Fed announced a small rate hike that the market loved so FB could rip if they perform even moderately well
- as always check out what shares of SNAP, Pinterest and GOOG do on Meta results, especially if add revenue is up, well maybe not SNAP as the market has given up on that company, GOOG and PINS are up, heck so is SNAP
- one other thing to watch closely is what Susan Li, the CFO says in the call, like what google did with Ruth Porat, they hired a numbers person to be the "adult" in the room to cut costs where possible.
Will the CFO talk about cutting costs or growign the company.
* note* I guess a huge $40B buy back indicates that FB's growth is over and Mark is capitulating to wall street here by handign back cash, rather than burning it on VR
> - 86,500 employees, I'm guessing alot of these are in recruitment, content moderation, etc
Headcount was 86,482 as of December 31, 2022, an increase of 20% year-over-year. Our reported headcount includes a substantial majority of the approximately 11,000 employees impacted by the layoff we announced in November 2022, who will no longer be reflected in our headcount by the end of the first quarter of 2023.
Wow so with the 10 billion total loss on VR last earnings, are they now up to 14 billion spent on VR and metaverse? That's unbelievable for how little there is to show of it.
I would love to know where this money is going. $700M isn't bad revenue at all, that's probably more than all VR competitors combined and certainly enough to run the division off of. They canceled all the really promising/expensive R&D efforts like their own SoC and their own OS, so they're once more dependent on Android (eh) and Qualcomm (nooo). They haven't launched any major software and the hardware has stayed the same except for the massively underwhelming Quest Pro, which they're having to sell for $400 off right now.
Either the Quest 3 reveal is going to be stunning or bureaucratic bloat has grown to the point it's sinking the division.
When you say they haven't launched any major software do you just mean they haven't launched a killer app? The platform has had lots of incremental updates and continues to.
They haven't launched much of anything - incremental updates are well and good, but the Quest Pro software page is unchanged from when it launched. The top selling software page is the same stuff it's been for years, largely the same as the Steam VR page since the launch of the Vive. Their biggest software release in 2022 was "Among Us VR." Richie's Plank Experience, an app from 2017 where you walk on a board, is still in the top sellers. To me these are not signs of a healthy ecosystem.
What do you mean by accessibility? Content aside, I'd say the number 1 problem is friction. The headsets are still too heavy, too buggy, too isolating, too ugly for mass adoption, even though all those things have improved a lot since the beginning. The potential is so high I can't see them entirely vanishing like 3d TVs-I maintain that AR glasses the size and shape of Ray-Bans would be a 100 billion dollar industry. But it might take another VR winter to get there.
I don't think it's enough to matter. At least, I've demoed to a lot of people and never encountered one. I've seen artificial motion cause often, but never just using VR.
>When you say they haven't launched any major software do you just mean they haven't launched a killer app? The platform has had lots of incremental updates and continues to.
They renamed the entire company from Facebook to Meta least year, and then nothing really happened. No big software or hardware release. If anything it seems the rate of change as slowed down in that year. The Quest Pro finally came out a full year later. And the Pro feels like a VR devkit to experiment with face tracking and color passthrough - a product to play around with and hope a developer hits on a killer app - not to rebrand your company around.
Even just in gaming there's not much. Resident Evil 4 is still probably the only thing close to an AAA release and it's a port of a GameCube game. (Porting games of that era is a great idea though, hope they do a lot more it.)
Ironically I'm very close to buying a Pro as a PC VR only headset. A feature Meta barely even mentions. The other features don't matter to me but the Pro lens clarity is unbeatable. It feels so good to never have to strain to keep your eyes in the perfect spot where the entire lens is clear edge to edge.
Unless you have a way to separate out what is attributable to forward investment vs current operating expense / revenue I don't think you can tell. Zuckerberg himself has painted a 10 year timeline on the investments they are making now.
To take it to a silly extreme, Apple has probably burned $14bn and hasn't released anything yet. So they have burned $infinity for every dollar they made. Does it make it a failure?
This is a good point, but I don’t think it’s as strong an indicator as, say, Uber selling rides below cost. I have a Quest headset which I now play a single game on, and I don’t generally game. I’ve shown an interest in the overall market.
It’s not as though it’s an obvious deal for me to use, like ride sharing or food deliver.
> - laid off/fired 13% of workforce so far this running year
I wish it was acceptable/normal for companies to reveal how much more of their workforce (if any) they plan to layoff in the coming quarters
It's almost as if there's a need for headcount projections.
> daily users of more than 2B, wow, growth of 5% yoy, that is good
eh, i always feel like this is dishonest for them. if a daily user is on whatsapp and they never see an ad, isn't that user just an expense for them? instagram users scrolling ads: revenue. facebook user scrolling ads: revenue. me talking to my family on whatsapp? unless they're benefiting from scanning the chat and delivering me ads on it (is this what they do? is it legal?) isn't it kind of like... they're paying the bandwidth/storage costs and getting very little out of it?
> on adds, from Bloomberg reporting "Ad impressions increased by 18% while average price per ad decreased by 16% for 2022."
is this left over from "apple's privacy changes made our ad targeting less effective so we need to display more, lower quality ads that are worth less to get as many conversions as we used to previouly"?
would you agree with the statement that a WhatsApp user is most likely the least profitable compared to FB/Insta or do you think that statement is missing some kind of information?
Is that including WhatsApp Business accounts (revenue positive) and the so-far limited roll out of WhatsApp payments in Brazil and India (revenue positive)?
In their last earnings transcript (3 months ago) they do talk a lot about Reels competing with TikTok and making a lot of traction.
They say that Reels growth is very high, but they haven’t built the tools yet for SMBs to advertise well with it, so revenue was relatively low but a focus for them going forward.
Haven’t read yesterday’s transcript yet but I’d assume more of the same.
Unlike Google, they did not hire the former EVP & CFO of Morgan Stanley, and next in line for Head of Treasury before she withdrew (making too much money at ms to move).
I think Susan seems great from afar (i am but a lowly swe), but it's hard to see them similar in any way. Susan Li joined FB in 2008 after her first job as an analyst for ~3 years at, you guessed it, Morgan Stanley.
The bigger story is that Federal Reserve Interest rate policy is stimulating rather than slowing down the economy as desired. Higher interest rates is higher interest payments into the economy by the government which is the deficit spending. The problem with it is that its very regressive. So folks holding large amounts of cash are benefitting from the added interest income. In 100 years history will judge these guys as clueless buffoons. Hitting the accelerator pedal rather than the brakes.
Metaverse notwithstanding, Facebook and Instagram are still huge cash cows. Ad CPCs are really high, especially mobile ads. Companies, especially in financial services and healthcare, paying so much $ for clicks to target older people, retirees, etc. and also people with medical problems. Obesity epidemic means more healthcare spending, same for people living longer.