Technology
Monday, December 18th, 2023 3:13 pm EDT
Key Points
- Meta’s Remarkable Turnaround: In 2023, Meta witnessed a significant resurgence, with its shares surging by 178%, positioning the company for its best year ever. This starkly contrasts with the challenges it faced in the preceding year, marked by a stock price decline, dropping sales, and the perceived financial strain of Mark Zuckerberg’s metaverse investment.
- Zuckerberg’s “Year of Efficiency”: Mark Zuckerberg’s declaration of 2023 as Meta’s “year of efficiency” proved to be pivotal. The CEO implemented hefty cost cuts, including cutting over 20,000 jobs, addressing economic challenges, heightened competition, and advertising losses. The change in approach contributed to Meta’s recovery, marked by a rebound in digital advertising and a 23% growth in the third quarter.
- Challenges and Skepticism for 2024: Despite the impressive performance, challenges loom for Meta in 2024. The digital ad market remains uncertain, new lawsuits allege harm to children by Meta’s products, and virtual reality remains a niche market. While the company continues to invest in the metaverse, concerns about out-of-control spending persist. Additionally, skepticism from analysts, such as Laura Martin from Needham, centers on existential issues, potential policy changes by platforms like Apple and Google, and competition from emerging trends like smart TVs and popular platforms like TikTok and YouTube.
In 2023, Meta, previously facing a crisis, experienced a remarkable turnaround with its shares rising by 178%, on track for its best year ever. This contrasts sharply with the previous year when sales were declining, TikTok was gaining ground, and the metaverse investment appeared financially burdensome. Mark Zuckerberg’s commitment to efficiency in 2023, marked by substantial cost cuts and a shift in focus towards advertising, contributed to the company’s resurgence. After three quarters of declining sales in the preceding year, Meta recorded a 23% growth in the third quarter of 2023, driven by a rebound in digital advertising and market share gains over rivals Alphabet and Snap.
Zuckerberg’s change in attitude, particularly in addressing shareholder concerns and improving communication, played a pivotal role in the company’s recovery, according to Longbow Asset Management CEO Jake Dollarhide. Despite continued investment in the metaverse, Meta’s refocused approach on advertising and responsiveness to investor worries contributed to its positive trajectory.
Challenges persist as Meta faces a rocky digital ad market, new lawsuits alleging harm caused by its products to children, and the niche status of virtual reality. The company adapted to Apple’s privacy changes, investing in AI to rebuild its ad technology and reported faster revenue growth than Google or Snap in the latest quarter. Chinese advertisers, notably e-commerce companies like Temu and Shein, contributed to Meta’s growth by spending significant amounts on targeted advertising.
However, skepticism remains for 2024, with challenges including the uncertain digital ad market, ongoing lawsuits, and the evolving landscape of virtual reality. Meta’s dependence on external platforms like Apple’s iOS and Google’s Android poses risks, and competition from TikTok and YouTube remains a concern. The potential impact of Google’s plan to phase out third-party cookies in 2024 adds to the uncertainties. Despite its strong performance, some analysts, like Needham’s Laura Martin, maintain a skeptical outlook for Meta in the coming year, highlighting existential issues and potential obstacles.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/18/metas-stock-wrapping-up-record-year-spurred-by-cost-cuts.html
