Plus, Another Wall Street Giant Is Reportedly Jumping Into Crypto
Welcome to your Sunday digest…my weekly breakdown of the things we’re thinking about and talking about in the Global Intelligence world.
We kick off this week with our first big number…$232 billion.
That’s how much Facebook’s market capitalization fell by on Feb. 2 when the company unveiled its dismal fourth-quarter earnings report.
The decline was the largest one-day value drop in stock market history, and equated to around 25% of the company’s market cap.
In a word: ouch!
Facebook’s stock continued to decline for the next week or so, before experiencing a minor bounce back. But at time of writing, it remains down more than 29%.
So, what’s going on with Facebook?
Well, it would be easy to frame the company’s collapse as part of a wider malaise in the tech and online advertising space…except that’s not true.
In its earnings report, Facebook predicted revenues of $27 billion to $29 billion. That would represent growth of between 3% and 11% year-on-year. Doesn’t sound too bad until you realize that anything below 11% would be the slowest quarterly growth in Facebook’s history.
It gets even worse when you look at its competitors.
Google parent, Alphabet, reported fourth-quarter sales of $75.3 billion, up 32% year over year. Pinterest saw a 20% increase in sales, beating expectations. Snapchat’s fourth-quarter sales increased 42% to $1.3 billion. So, Facebook’s poor showing goes against the industry grain.
An even bigger problem for Facebook is that the company lost about 1 million daily users globally during the fourth quarter.
Now, that’s really huge. Social media companies need to consistently add names. Losing them is nothing short of a catastrophe.
The point is that Facebook is bleeding users to younger, fresher platforms like TikTok and Snapchat.
The company has concocted a few strategies to stem the tide.
It has developed Instagram Reels, a social media platform focused on short video clips that’s intended to rival TikTok. (Haven’t heard of it? You’re not missing much.)
And it has the metaverse.
Last year, Mark Zuckerberg renamed Facebook’s parent company to Meta to highlight its metaverse ambitions. He realizes that Facebook is dying, and the only way to save it is to try and take control of the next iteration of the internet. That’s the metaverse…an interactive 3D internet that we’ll experience all around us using virtual reality and augmented reality technology.
Facebook may have all the money in the world, but my bet is that its effort to rebrand itself as an metaverse company will be as successful as Reels will be at taking on TikTok. That is to say a complete flop.
The thing to understand is that the metaverse will be a fundamental reboot of the internet. It’s Web 3.0.
The last time this happened…when we moved from Web 1.0 to Web 2.0…the giants of Web 1.0 were largely eradicated by newer, nimbler rivals.
Ask Jeeves, AltaVista, and all the other Web 1.0 search engines were conquered by Google and its powerful Web 2.0 approach. Likewise, Netscape was overtaken by Internet Explorer and Opera and Chrome.
It will be the same in Web 3.0.
Tired, old Facebook (I refuse to call it Meta) won’t own the metaverse. It’s a centralized company trying to stand out in a decentralized environment. That’s not going to work. Younger, nimbler, decentralized rivals will replace Facebook. Several are already taking shape. That’s the nature of evolution in the digital economy.
Next up…the real cost of inflation.
Yesterday, I wrote a column about the spiraling inflation crisis. I’m not going to rehash that here, except to share this tidbit…
With inflation at 7.5%, the real impact on your wallet is $250 per month.
That’s how much rising inflation is hurting American consumers on average, according to a new analysis from Moody’s Analytics.
The figure equates to $3,000 per year in additional expenses. And the reality is that the figure is probably even higher for lower-income families since certain categories, like rent, are experiencing even greater rates of inflation than 7.5%.
The bottom line is that there are lots and lots of families in the U.S. who simply can’t afford an extra $3K a year in expenses. And that bodes badly for the economy and society as a whole.
Finally, this week…another sign of crypto’s growing mainstream acceptance.
According to new reports, BlackRock, the world’s largest asset manager with over $10 trillion on its books, is getting ready to launch a crypto trading service for its investor clients.
The Wall Street giant will reportedly help clients trade crypto and also allow clients to borrow from the company using crypto assets as collateral.
BlackRock, JPMorgan, Goldman Sachs…virtually every staid, white shoe Wall Street firm is now involved in crypto on some level.
In fact, it’s getting easier to list the number of mainstream investment banks who haven’t already jumped in. Something to point out the next time someone tells you crypto is a sham.
That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website.
Enjoy the rest of your Sunday.