​Nearly every major tech company has suffered a stock market crash in the past year, but none has crashed like Meta, which has staked its entire future on something that doesn’t exist: the meta universe. Facebook was doing very well before the big rebranding, but why did it go so far “in the head”? What is Mark Zuckerberg’s fault?

From stock market heaven to hell

A year ago, Facebook was valued at $1.1 trillion and doing well, but now the value has fallen to $265 billion, a quarter of what it was in fall 2021.

A small part of the fall can be explained by problems in the economy, the fact that the pandemic is over and many trends of those years have almost completely disappeared. There are other factors, such as inflation, interest rates, and changes to Apple’s data policies.

• Facebook will lay off 11,000 employees in the first round of mass layoffs in its history

For most tech companies, the fall in the stock market was caused by external economic factors, but at Meta the shock came from within due to a radical change in the direction in which huge resources had been invested. This change alarmed shareholders and investors.

Even the most pessimistic expert would not have predicted such a fall from Facebook, which a year ago through a radical rebranding became Meta, and Mark Zuckerberg said that Meta will be a metauniverse company, which was presented as the future Internet, a virtual world full of avatars, where in 2030 billion users.

The problem is that some Meta shareholders were spooked by the fact that a company that was performing well and growing rapidly was betting on a concept that was not known to be successful. Facebook has invested more than $12 billion in one year on the subject of the metaverse, and the results are poor, and this year the investment will be even greater.

Too sudden, too much, too risky

Many companies change their strategy because of losing money. Target lost money because it changed its strategy, according to an analysis published by the Wall Street Journal. It also explains the business theory that says big business successes also come from small failures because it’s okay to take reasonable risks and test things out.

The problem with Meta – Facebook is that it has bet the company’s entire future on the metaverse, taking human and technical resources from divisions that were making good money and channeling them into the metaverse, a concept that has yet to prove its viability and where tens of billions of dollars of investment will be needed (some estimates say more than 100 billion). Furthermore, after these investments, it would be far from certain that hundreds of millions of people would want to enter and spend money in this virtual mega-environment.

The head of Meta can be accused of pursuing his own personal ambitions to build a so-called meta universe, and to do this he takes resources from departments that have been working “by the hour” and directs them to areas that require significant investment without loss.

Overbearing boss?

Mark Zuckerberg has also said in recent public appearances that he is confident the metaverse will succeed, surprising analysts and panicking shareholders and investors. The metaverse seems almost like an obsession for the Meta boss, and a radical change in direction seems hard to see, as does a serious underinvestment for the metaverse. Zuckerberg, although he owns 13% of the shares, has much more power when it comes to voting on any matter related to the direction of the company (more than half of the votes on the board).

Zuckerberg’s experiment in the uncertain direction of the metaverse is too risky and puts too much of the future at stake for a company that was doing well financially before embarking on a new path.

Facebook has already had many problems related to the scandals it has been involved in, the extent of the misinformation phenomenon on the network and competition from TikTok. But the biggest problem that led to the stock market crash was self-inflicted, a sudden and reckless “turn” to the concept of a metauniverse.

Rarely has the CEO of a giant technology company had so much independent decision-making authority and so little opposition to balance key decisions.

The goal reached 87,000 employees, bringing on 29,000 in less than two years. In the letter, Zuckerberg announced that he would lay off 11,000 people, that layoffs were his last resort. It is, however, not enough, as there are other plans to cut costs significantly, including getting rid of office space.

Sources: Wall Street Journal, Reuters, Guardian, Washington Post