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Thursday, July 25, 2024

Meta Myths

Meta Myths


What happened to Meta last week — and my response to it — expressed in meme-form:

The GTA meme about "Here we go again" as applied to Facebook

In 2018, the market was panicking about Facebook’s slowing revenue and growing expenses, and was concerned about the negative impact that Stories was having on Facebook’s feed advertising business. I wrote that the reaction was overblown in Facebook Lenses, which looked at the business in five different ways:

  • Lens 1 was Facebook’s finances, which did show troubling trends in terms of revenue and expense growth:

    Facebook's revenue growth is decreasing even as its expense growth increases

    As I noted at the time, I could understand investor trepidation about these trend lines, which is why other lenses were necessary.

  • Lens 2 was Facebook’s products, where I argued that investors were over-indexed on Facebook the app and were ignoring Instagram’s growth potential, and, in the very long run, WhatsApp.
  • Lens 3 was Facebook’s advertising infrastructure, which I argued was very underrated, and which would provide a platform for dramatically scaling Instagram monetization in particular.
  • Lens 4 was Facebook’s moats, including its network, scaled advertising product, and investments in security and content review.
  • Lens 5 was Facebook’s raison d’être — connecting people — where I made the argument that the company’s core competency was in addressing a human desire that wasn’t going anywhere.

I concluded:

To insist that Facebook will die any day now is in some respects to suggest that humanity will cease to exist any day now; granted, it is a company and companies fail, but even if Facebook failed it would only be a matter of time before another Facebook rose to replace it.

That seems unlikely: for all of the company’s travails and controversies over the past few years, its moats are deeper than ever, its money-making potential not only huge but growing both internally and secularly; to that end, what is perhaps most distressing of all to would-be competitors is in fact this quarter’s results: at the end of the day Facebook took a massive hit by choice; the company is not maximizing the short-term, it is spending the money and suppressing its revenue potential in favor of becoming more impenetrable than ever.

The optimism proved prescient, at least for the next three years:

Facebook's stock run-up from 2018 to 2021

Facebook’s stock price increased by 118% between the day I wrote that Article, before peaking on September 15, 2021. Over the past year, though, things have certainly gone in the opposite direction…

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