Mark Zuckerberg’s Disaster Is Taking Silicon Valley With It.
With a single earnings report and a disastrous conference call, Mark Zuckerberg wiped out $240 billion in value from his company. Meta’s was the largest one-day loss by a U.S. company ever, and the ripple effects were closer to tsunamis throughout Silicon Valley. The list of tech losers reeling from the Meta Platforms (formerly Facebook) reckoning is long and full of familiar names: Spotify was 16 percent lower; Twitter was down about 6 percent; and even companies that were relatively safe, such as Apple and Microsoft, saw hundreds of billions of dollars erased from their market value. Every percentage point here is a huge sum of money gone, at least for shareholders. Why did this happen? Who is responsible? Has the bell tolled for Big Tech?
To answer that last question first, yes and no. Many of Facebook’s problems are of Zuckerberg’s own making. It wasn’t even six months ago that the billionaire tech developer decided not only to change the company’s name but to go even further — to hijack its reason for existing and create a whole new digital reality, the metaverse, amid one of the most damaging, long-lasting scandals of the company’s existence right here on planet Earth. (More on that later.) Meta spent more than $9 billion to build this metaverse last year, it was revealed in securities filings. This is an astronomical sum, especially since Zuckerberg has tried to warn investors that it could be as late as 2031 before he really gets it right. It’s the kind of leap of faith that, ironically, tends to get a more sympathetic hearing from smaller, scrappier companies, such as Magic Leap, that have far less money and resources at their disposal — except that the money comes from venture capitalists who can handle companies going bust, not the public stock markets that fuel people’s retirements.
But there are other, structural reasons for Meta’s rout, and the weight of those changes has suddenly registered with the rest of the world. The first is Tim Cook, the head of Apple, the largest company in the world. Last year, Apple allowed its users to opt out of getting followed around the internet by advertisers, kneecapping Facebook’s whole business model. Facebook is one of the avatars of surveillance capitalism, an economy that diminishes privacy in order to make a company more money. By last summer, consumers had decided they didn’t want to be tracked, with only 25 percent saying, Yeah, sure, follow me around. Now not only does Facebook get almost all of its money from advertising, but people who have iPhones — and Apple products more generally — are a much more appealing audience for advertisers since they tend to have more money than Android users. During the last three months of 2021, when inflation picked up and advertisers started to pull back on spending, Apple’s move hit Facebook hard and signaled to the rest of the world that online advertising will be going through a hard time.