Why a drop in Metas stock value is sweet for the future of social media

Meta chief executive Mark Zuckerberg has also used his majority stake to double down on his ambitions for the "Metaverse," a digital reality project he's already spent more than 0 billion on — with questionable results, based on preliminary investor and media reactions. . Zuckerberg has promised a lot more funding in the Metaverse next year.

Meta has invested heavily in her imagination and foresight for the Metaverse, which can be accessed using a digital reality headset. Credit: BrianPenny/Pixabay Technology changes fortunes

Despite recent turmoil, Meta has the largest social community on the planet. These latest results, which scared investors away, nevertheless confirmed total revenues of billion and profits of .4 billion.

To maintain its leading position in the market so far, Meta has sometimes bought up its most promising competitors at the earliest. Integrating these newly acquired startups into the company's ecosystem helped maximize revenue generation and exclude competitors.

Research shows that digital marketplaces tend to be dominated by a single agency, but beyond that these companies tend to be much more specialized than the large companies of the past. Meta is currently active on social networks and earns money almost exclusively through advertising.

Attempts by these companies to break into other areas usually fail – do you know anyone with a Facebook phone? And while you might not remember Google's attempts at social media, iPhone customers are probably at least familiar with Apple's Maps app.

Facebook therefore relies on consumers who use devices from other tech companies to make money. But as global social media ad revenue slows, it's getting harder and harder. Apple, for example, began charging Meta for revenue generated from iPhone customers. And research shows that when two companies compete to make money from the same exclusive source, their successive markups not only increase costs for buyers, but also decrease revenue for both companies.

failure of world domination

Meta's strategy allowed it to dominate social media in Western markets until recently, but not in China, a country with more than 300 million social media users. Since 2009, Facebook has been blocked by the country's "Great Firewall", the largest and most sophisticated censorship system in the world.

Although not profitable, ByteDance's market capitalization is now valued at around 0 billion - compared to Meta's current valuation of £270 billion. It's also a trend among younger customers who are generally much more social media-hungry.

Meta can't just buy TikTok: it's too big, unlisted, and tightly run by the Chinese government. Zuckerberg's company instead tried to compete by launching comparable options on Instagram. Ironically, the only major market where this strategy really works is India, a country that banned TikTok in 2021 following a military dispute with China.

TikTok tends to attract younger viewers than established platforms like Facebook. Credit: Solen Feyissa/Unsplash fair competition

As TikTok has moved beyond Meta's reach, Western regulators have also begun to tackle perceptions of lack of competition in digital markets in terms of innovation. Although research shows that the win-win nature of highly innovative markets is generally good for consumers, this is only true when all firms have a high probability of becoming dominant.

In addition to recent Supreme Court rulings against the dominance of technology companies, the European Union has also recently introduced the Digital Markets Act. This prohibits many practices used by dominant firms to protect their status in a market.

Similar legislation is expected from the US after November's midterm elections, while the UK has lobbied Meta to promote the Giphy gif library to ensure it doesn't stifle competition. in the internet marketing industry.

All of this means that Meta needs to invest money in its personal merchandise for Facebook to remain dominant. To be the boss of tomorrow's market, the company cannot rely solely on the search for promising start-ups.

But his metaverse is a nebulous project and a strange conjecture. After all, Google has yet to spark interest in Google Glass, although the know-how behind it has paid off. What has changed to convince ordinary people to wear a lot of digital reality headsets?

Renaud Foucart is a lecturer in economics at Lancaster University Management School, Lancaster University.

This article first appeared on The Conversation.