Jeran Wittenstein, Bloomberg:
Meta Platforms Inc. has tumbled out of the world’s 10 largest companies by market value, hammered by its worst monthly stock decline ever.
Once the world’s sixth largest company with a valuation in excess of $1 trillion, the Facebook parent closed on Thursday with a value of $565 billion, placing it in 11th place behind Tencent Holdings Ltd., according to data compiled by Bloomberg.
Please accept my condolences.
Huge changes in market value like Meta is currently experiencing can partly be attributed to the massive market capitalization reflected in today’s top ten. The Economic Research Council published a chart in 2019 showing the ten most valuable publicly traded companies for twenty years prior and, as recently as 2014, only one was worth more than a trillion dollars. That is not the world we live in any more. Even normal day-to-day fluctuations reflect billions of dollars that ostensibly reflect investors’ confidence.
But there is also an undeniable loss of confidence in Meta’s ability to maintain the success of its core product — targeted advertising — in the face of increasing regulatory scrutiny, and changes made by operating system vendors. Meta’s virtual reality efforts, with which it is hoping to become an operating system owner itself, are still far away, and I do not think the company has yet demonstrated a compelling case for its existence.
For now, it has ads to sell across its platforms, and that is getting harder as public pressure mounts against its business practices. Unfortunately, as Meta’s empire is increasingly scrutinized, small businesses that depend on it are feeling the squeeze.
Suzanne Vranica, Patience Haggin, and Salvador Rodriguez, Wall Street Journal:
Martha Krueger, who runs a gift-basket business called Giften Market, used to spend her entire advertising budget on Meta Platforms Inc.’s Facebook and Instagram. She picked up a new customer for every $14 she spent.
When Apple Inc. introduced a privacy feature for mobile devices last year that restricts user tracking, she said, her costs to acquire such customers rose 10-fold. In October, she shifted her whole ad budget to search ads on Alphabet Inc.’s Google.
I empathize with the owners and marketers who work with businesses like these, which have depended on precisely targeting advertising to lower their marketing costs and get more customers. However, I think we have lost sight of how Meta was able to be so successful in the first place: it tracked users’ behaviour without their explicit consent or knowledge. What I find so frustrating about this is how Meta defends its practices by invoking the trust these businesses have placed in it:
Meta said in a written statement that it has more than 10 million advertisers. “Apple’s harmful policy is making it harder and more expensive for businesses of all sizes to reach their customers,” it said. “We believe Facebook and Instagram remain the best platforms for businesses to grow and connect with people, and we’ll always keep working to improve performance and measurement.”
Meta constructed a fundamentally unethical business model that allowed it to offer cheap ads, and it is laundering that scummy behaviour through the much better reputation of coffee shops, and florists, and travel agents, and other small business owners. Entrepreneurs should not be blamed for taking advantage of the marketing opportunities available to them.
This is a complex problem with a simple root: in a more just world, where the privacy of individuals is truly respected, Meta would never have offered these kinds of ads in the first place. But the company recognized that it was on legally firm ground to follow users’ activity across the web and through third-party apps, and it built its entire business around milking that strategy for everything it could give. It gave small business owners the ability to buy better advertising at lower rates, but has cost all of us our privacy online with little in the way of notice, consent, or control.
So that is how we got into this mess, and lawmakers in many regions around the world are trying various ways of getting us out of it. But Apple, having a business model more conducive to privacy and being an operating system vendor, realized it could also do something about tracking without due consent. It asks a simple question when apps want to track a user: do you want to permit this? Most people answer in the negative.
This naturally leads to the question of what business it is of Apple’s to have a say in other companies’ practices. It has a long history of doing so and a familiar future ahead. That is a discussion way too long for a single post, especially one I am publishing on a Friday evening. But there is one argument I think can be addressed in short order: all Apple did to push Meta’s buttons is that it now requires explicit consent for tracking. If Meta’s business model cannot handle a simple question of permissions, that is a pretty crappy business model. It should have been better prepared for a day when lawmakers started asking questions. But it was not. Meta’s best move has been to use the plight of small businesses, lured by its short-term promises, to excuse its unethical practices. Shame.