News & Analysis

Facebook Suffers Biggest Drop in Share Price in History, Losing Over S$300 Billion in Market Value

Deemed as “an existential moment for Meta”, Facebook is now stuck between a decline of users and the surging cost for their metaverse project. Worsened by stiff competition with ByteDance Pte Ltd’s TikTok, read on to find out more about our perspective of Facebook’s biggest share price drop in history.

With a more than 25% dip in the share price of Facebook’s parent Meta, the stock made its biggest one-day drop ever, dipping off more than S$309 billion from its market cap. This is Facebook’s largest drop in share price in history, ahead of the 19% decrease it had previously experienced in July 2018.

Facebook now faces an ‘existential moment’, as said by Vital Knowledge founder Adam Crisafulli. To progress from this state is a tricky feat, but will be necessary for the tech giant to remain competitive.

Why did this happen?

So, the question is, what happened? Well, it could be due to Meta’s dreary quarterly earnings report - reflecting a decline in users and a surge in spending focused on the company’s metaverse project.

According to Meta, this user decline was caused by increased competition from TikTok and the rise in internet data costs in India, Facebook’s biggest user base.

However, some, including TikTok User Claflin, speculate that it could be due to Meta’s neglect of their application’s user experience. With prioritization of profit rather than people, the original preloved user experience has now been compromised by the oversaturation of ads and monetised mediums. People are now tired of these tactics and are losing interest in Meta’s applications altogether.

Add on to that Apple’s iPhone privacy changes, and external macroeconomic challenges, and you can see why there’s a drop in revenue for the giant social media company.

In addition, investors are also doubtful after Meta mentioned that it hopes to have a “meaningful increase” in spending for its "metaverse" project for 2022. They had previously allocated $10 billion in 2021 for this project.

facebook and meta logo

How did it affect other investors?

In response, many investors have swiftly abandoned their Meta shares. Nevertheless, a sizable number of investors are not overly worried about the shares.

However, Meta’s fall has affected investors beyond its own, causing a dip in the broader market indexes.

The S&P 500 fell 2.4%, its biggest drop in the past year. Nasdaq composite also fell by 3.7%, its biggest loss since September 2020. Even markets, such as The Dow Jones Industrial Average, which does not include Meta Platforms in their market, were affected and fell a modest 1.5%.

Other social media stocks also plunged after Facebook’s fall. Snap shares dipped by more than 23%, Pinterest shares decreased more than 10% and Twitter shares fell more than 5%.

Will Meta remain competitive?

With TikTok holding the crown for the most downloads in 2021, Meta faces stiff competition.

With many young users gravitating to TikTok over Meta's Instagram, Instagram is struggling to keep up. Although Instagram Reels is said to be Instagram’s fastest content format for Meta at the moment, TikTok is “a competitor that is compounding at a pretty quick rate too”, as said by Chief Executive Mark Zuckerberg to the analysts during their Wednesday meeting.

That has made it harder for Facebook to convince advertisers and creators to move from TikTok and populate Instagram Reels.

However, Facebook may still have a chance to regain its crown. If their novel metaverse project succeeds, there might be hope for Meta and their team.

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