Facebook experienced a significant decline in value, marking the largest one-day drop in Wall Street history. The sell-off was triggered by disappointing financial results. Meta, the parent company formerly known as Facebook, saw its shares plummet by 26.4%, resulting in a staggering $230 billion loss in value. This decline came after the company announced a decrease in user numbers as a result of growing competition from TikTok.
The drop in value also had a dramatic impact on Mark Zuckerberg’s personal wealth, diminishing it by $28.5 billion and causing him to fall down the list of the world’s richest individuals.
The drop in Meta’s fourth quarter profits can be attributed to the company’s extensive investment in “metaverse” technologies, such as virtual reality. Additionally, the company predicted a slow revenue growth of only 3% for the first quarter, a significant departure from its usual double-digit growth.
The most alarming revelation was the unprecedented decline in daily user numbers for Facebook. Over a span of three months, the platform lost 1 million users, leaving it with 1.929 billion daily users. This decline is noteworthy considering Facebook’s consistent growth since its inception in 2004, which had made it one of the most valuable companies in the world.
Mark Zuckerberg attributed a portion of this decline to the rise of TikTok, stating that “apps like TikTok are growing very quickly” and offering users more choices for their time. This event sent shockwaves throughout the social media industry, causing shares in Twitter to drop by 5.6%. However, parent companies of other platforms like Snapchat and Pinterest initially experienced declines but quickly rebounded during extended trading after surpassing Wall Street’s expectations in their own results.
The tech-heavy Nasdaq composite index also suffered a 3.7% decline in response to the Facebook turmoil. The $230 billion loss in Meta’s value exceeded the previous record set by Apple in September 2020, when its market value dropped by $180 billion during a tech market sell-off.
Meta executives provided reasons for the user decline, including younger users increasingly favoring apps like TikTok, higher data costs in India (a vital market for Facebook), and the pandemic causing users to join the platform earlier than expected but subsequently resulting in a recent shortfall.
Wall Street analysts were harsh in their critiques of the company, with many lowering their valuations and questioning Meta’s overall strategy.
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