Meta: Biggest bet ever on new technology

What Meta (formerly Facebook) has done in the Metaverse is the biggest bet a tech company has ever made on unproven new technology.

Meta’s $70 billion spending on the Metaverse is the biggest ever bet by a tech company on unproven new technology https://t.co/BxxVVOCCup pic.twitter.com/EosbWITdXt

— Matt Navarra (@MattNavarra) September 28, 2022

According to some recent analyzes, in total The company has already invested about $70 billion It is unknown how this number was calculated, but it was in the design and development of that metaverse.

Meta: the largest ever investment in the development of new technology

The same analysis also looked at other technologies that other tech companies hadn’t previously invested in. meta‘s $70 billion investment far exceeds them all.

The second largest bet by investment amount is self-driving car, Over $27 billion It is reported that it has already been invested. That number doesn’t include Tesla’s investments, but it’s overall much lower than Meta’s investments, which until a year ago only included funds committed by the company known as Facebook.

to be third Apple to invest $3.4 billion in iPhone design and manufacturingwas the first real smartphone with a touchscreen that rivaled a computer.

For example, Alphabet, then still called Google, invested “small” just over $1 billion in the design and development of Android.

So the meta so far is metaverse Just like Apple invested about 15 years ago to make the iPhone.

In both cases, it was a huge gamble, as there wasn’t enough information prior to release to say there was a good chance of success.

Something similar already existed, but either wasn’t based on advanced technology like the iPhone, or market penetration was still very immature like the Metaverse.

In other words, it’s an absolute stretch to say that we already have all the information we can believe that the meta is very likely to succeed.Any initiative that jumps into the 100% metaverse is specific and already established. Ventures based on established perspectives.

A $70 billion bet could be seen as excessive gambling, and indeed the financial markets have not paid off at all.

Meta’s share price on the stock market

Shares fell on the stock market last year when Facebook announced it would change its name to Meta to delve into the Metaverse. From $340 to $310 within a week.Then prices plummeted when some serious economic problems hit From $320 to $240 February 1st this year.

After that, as the Nasdaq continued to fall sharply, The price has dropped to around $140 today.

Compared to before the name change, the company’s historical stock price has fallen by more than half (-59%), returning to the lows of March 2020 when the financial markets crashed. COVID pandemic.

In fact, the current value corresponds to the March 2017 value, so by the end of 2021 to the beginning of 2022, the value of Meta stock, formerly Facebook, will wipe out all gains of the last five years. I’m sorry.

Put another way, the market seems to view Meta’s massive investment in the Metaverse as an excessive gamble with little chance of success.

The key to understanding these concerns is perhaps the health of the company.

Until 2018, Facebook was commonly believed to be a large, high-growth company.

But in 2018, we had a very serious problem with the notorious Cambridge Analyticarelated issues. This was a real scandal that cast a wide and deep shadow over the actual performance of the company.

Since then, despite the huge success of Instagram, a popular social network owned by the same group, the sentiment towards Facebook has never returned.

That scandal caused Facebook’s share price on the stock market to plummet 34% within six months at the end of 2018, but it recovered all its losses during 2019. In March 2020, there was another collapse, this time with the start of the pandemic, but it had already recovered all its losses the following month.

As such, by April 2020, the company’s value had returned to June 2018 levels. There was a real boom in 2020 and 2021 due to the huge bull run caused by various central bank he QEs being launched around the same time. This bull market for Facebook stopped just as he announced a name change to the Meta and metaverse projects in October 2021.

For example, the Nasdaq bull market stopped after three months, i.e. January 2022.

Compared to the highest ever, Meta stock is currently down 63%while the Nasdaq “only” 31%.

It is therefore clear that the financial markets have punished meta turnarounds for taking huge bets on the metaverse as real gambling.

metaverse market

The Metaverse is already a tangible reality today, but it’s worth mentioning that it’s much smaller than, say, the social networking business that exploded the Facebook/Meta companies in the last 15 years.

There are two major issues.

The first generally relates to the ability of this new technology to actually overcome some sort of mass adoption and reach similar sizes to those achieved in the past by social networks. Not only is it not a foregone conclusion, but many consider it unlikely.

The Metaverse is already a reality. game However, not everyone agrees that similarly attractive results can be achieved outside of that field. Similar attempts have been made in the past, but they have completely failed, so the suspicions are justified.

The second is even more relevant as far as the specific case of Meta is concerned. In other words, can a company that appears to be on the verge of an identity crisis and decides to spend huge sums of money to achieve an uncertain outcome really sustain and proliferate this perilous enterprise? Is not it?

For now, the market looks decidedly negative about this prospect. Especially since I’m struggling to concretely understand how Meta’s metaverse can actually expand and generate cash flows comparable to what is currently being generated by the Meta Group’s social network.

The online gaming industry is by all accounts a rich industry, but certainly not as rich as the social networking industry.

In addition, there is another aspect that casts a dark light on Meta’s idea. That is the fact that we are the only technology company to have made a significant investment in the Metaverse. If the latter is truly a huge business, you might expect other big tech companies to get in as well, but that hasn’t happened.

For example, Alphabet’s (formerly Google) stock price on the stock market peaked in February of this year and has since fallen only 34%, as has the Nasdaq. To our knowledge, Alphabet has not invested heavily in developing the Metaverse.