Currently, tech stocks are taking a hammering in the marketplace, especially those that rely on digital advertising revenue and mass product sales. I think there are two main reasons for this driven by consumer demand, where people are having to choose between paying their cost of living and paying for their entertainment. Whilst some will choose the latter, a lot of money is going to be pulled out of disposable consumerism whether it be goods or services.
And people say Bitcoin is volatile.
But, while that month chart does look pretty dramatic, the five year charts tell a different story, where for example Alphabet (Google) and Apple look like this:
And Even Meta (Facebook) which has taken an absolute hammering over the last year and is down 66% since its last high in 2021, is actually trading at around its 5-year low.
And if we push it out to the Max, it doesn't look all that bad, depending on when investors bought.
But, while all business models rely on consumption (demand) of some kind in order to operate, there are different forms of it and they are going to behave differently in the marketplaces. For example, Around 95% of Facebook's income is through advertising, which means that while people consider it a social platform, from the business perspective, it is actually an advertising platform, one that offers advertisers an advantage because it is able to granularly target consumers through the data they provide by using the social mechanisms.
However, the data is only useful when the likes of Apple allow that targeted advertising to happen, meaning that Meta are reliant on the behavior of other goods and services too, including things like GDPR laws in Europe. The changes to the way data is handled at various levels means that their value proposition for advertisers has been greatly diminished and with an expected downturn in consumer spending advertisers will be notably more cautious, especially those with "nice to have" products, rather than necessary to have.
And, a lot of the advertising dollars of nice to have are through tech and subscription content too, where marketing budgets have been burned heavily for customer acquisition at all costs, but those customers are now paring back their expenditures, and since there is no brand loyalty built and no ROI to mention, there is no reason for a consumer to stay anyway. If it doesn't offer value to the consumer, the consumer will go elsewhere and when that happens, advertisers will follow.
Which is why Meta changed its name and has so far unsuccessfully attempted to produce goods and services, rather than being just an advertising platform. But, the problem with this pivot is that it is unlikely to be market accepted, because it fundamentally changes what people believe Facebook to be, in a domain that most people don't understand now, let alone have the imagination to see what the future might hold. Crypto has a similar problem in this regard, where it is judged based on what are essentially early conceptual iterations that will evolve into common place products and services, accepted by the masses.
Yet, this overreach is common for the "too big to fail" mentality, where even at the granular level of celebrities, the more famous a person becomes, the more confident they are to branch into other domains, giving their opinion, whether relevant or not. And, because they are famous, tall poppy syndrome is in play and they are open to more broad criticism on topics that they may have little professional business being in. Kanye West and Meghan Markle might illustrate this currently, where no matter what they say, they are going to be opposed by outspoken critics in an environment of polarized discourse.
Reinvention isn't easy, nor is it cheap, but the more ingrained the perception in society, the harder it is to change opinions. When a societal phenomenon like Facebook decided to reinvent themselves as Meta and change course, no matter how big they are, they reduced their clout down toward the smallest players on the field, as it meant that they forced their customers to reflect on their buying decision and ask if they wanted to opt-in again. Many haven't, especially since Facebook itself has stagnated in user growth with many becoming far less active than they were earlier, meaning that all the value they were delivering to their real customers (advertisers) is withering away.
This bloodbath for tech stocks is actually far less dramatic than it indicates, as it is more a correction from the high, where prices were essentially artificially inflated based on unsustainable hype during Corona. The evaluations of these companies was hype-based, not product offering-based, which means that like many of the crypto projects, once the hype subsides and there is no product or service to support them, they disappear. They are affected two-fold also, as inflation and economic collapse due to Covid reaction mishandling and utility prices from war, have further driven the value proposition they offer downward.
A lot of the advertising service platforms like Facebook are going to continually struggle, as the advertising market changes with consumer demand and technology. While it is easy to say that Facebook has made a mistake by trying to build a Metaverse experience, I think that they know very well that if they don't start doing something, they are going to be slow-bled out of the market anyway. Doing what they have done is a calculated risk for survival in the long-term, even though it might kill them early.
And, as the saying goes and I have mentioned many times before,
nothing lasts forever.
It is the law of the land, no matter what is observed. But, this doesn't mean that there isn't continuance, as when a behemoth dies, it leaves a vacuum for many others to seed, grow and thrive. It seems like such a loss at the time, but through this process of market distribution across many companies, the economic mass ends up being greater than when there was just the large company overshadowing, and the market place becomes more competitive, innovative and secure.
They might start from a bath of blood, but it feeds the growth of flesh and bone.
Taraz
[ Gen1: Hive ]
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I think youtube may be going through sort of the same thing. With all the banning that took place the last couple of years, some of the off-shoots are gaining momentum. This will bode well for Three-Speak I think.
I hope threespeak can get its ducks in a row in time. They need some high quality devs to ensure it is smooth, fast and functioning well. YouTube is Google owned and google makes about 80% of its income from advertising - so they will take a hit too at different points of their business.
Totally agree with this - I mentioned this to my friends before the exact same thing. I see the media saying or friends/relatives saying that crypto is so volatile and it is very dangerous (i.e. don't ever touch it, some say), while on the other hand, no one expresses the same opinion about equities as they are seen as a more "conventional" type of investing. You are right that some of these tech stocks have fallen more than crypto YTD and some even fell 20% or 30% in 1 day (I can't remember the last time a move of such magnitude happened to Bitcoin).
Interesting in depth sharing about Meta. The question I am more curious about is, would you buy Meta at these valuation levels? Hehe!
The other difference about investing into traditional or crypto is, the amount people invest. Most traditional into crypto investors will put 5-10% on crypto, not their whole bag. But they will put the rest into the "stable" investments and tech people will usually back tech stocks. They are likely hurting.
I wouldn't touch Meta :D
Yeah you are right about that. Thanks for sharing! :)
What a striking image, @tarazkp. "The bird is free, Musk wrote and asked Tesla engineers yesterday to take control of Twitter's source code, before making the operation official and public. Now Tesla engineers are evaluating the Twitter source code. Many things will be revealed in the coming days, so I feel that we are living in a time of change and those who will manage to transcend must undergo transformations and adapt to new patterns. We are already seeing how some platforms and social networks are falling into disuse because they are not attractive to the public. I also agree with you: "A rey muerto, rey puesto". Those who leave do not leave an empty space because it is immediately occupied by another who wants to enter the game. A worthy game of suspense, but also of creativity and resistance. A nice weekend
The blood of cherries!
It will be interesting to see if Musk will be willing to release all the behind the scenes nonsense, considering it is his now.
Vacuums will always be filled eventually.
Things are not going ok with Meta in my country as well. The competetion board fined €18.6 million for violating competiton law by merging collected data. They are more than a social media.
They are much more than social media and they are likely also going to have to increasingly face responsibility for the content they display.
It may seem that after such strong falls in the shares of these companies, cryptocurrencies will also fall. But no. From these levels we will only grow.
Looking long, I think crypto is here to stay for a while, and the trend will continue upward.
I barely use facebook. Basically it just reminds me of my ,,friends'' birthdays. Youtube I use more because I had some problems uploading to 3speak.
Exactly. Most people only use FB for the events calendar :)
Facebook and Youtube are slowly but surely becoming unbearable due to the adverts that they have in place. 🤢
Do you still use them?
YouTube for me is only a DIY site :D
I kinda do :D
Facebook is totally an ad agency now. 90% of what I see on my timeline is adverts
Most people I know who still use it, barely post anything there - they use it for events only.
That will be a proper use of the app
People don't use Facebook like before,I don't even know when I am active on that platform,I see why they are trying all things to port into meta but this is not the best time for anything metaverse,like you said ,is just hype base no product to support it right now ,this became disadvantage ,I think that Is the reason why Facebook stock keep dumping
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Facebook is a dumpster fire, so perhaps it deserves to dump :)
I think part of the selling is down to people taking profits.
There were a lot of early retirements during the pandemic by 50-somethings, who would have sold stocks and put the money in an income bond that produced a revenue stream to live on.
Yes and it is also getting ready for the recessions - why hold when you can dump and buy back?
And there starts the disliking, if not the downfall
Does meta have its crypto? I know nothing.
Well, I had never been a fan of facebook, and with time youtube has also become annoying by giving so many ads
THey were going to make a crypto, but I think it got vetoed.
Vetoed by??
I think they were going to run into issues with legislation
Hmmmm.
And with crypto how would they deal with so much spam and plagiarism. I think there would be a great dump of their coin
It would fundamentally change the platform again, meaning that those who are still there, will likely leave anyway.
Hmmm
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I think the metaverse is just at the beginning of the road. In the coming years, many companies will join the metaverse world using the blockchain network.
Tech has been the most favored trade and thing change over time. Nothing really lasts forever and I am not surprised to see the tech stocks started to pull back. They have been on a tear over the past decade and everything it has touched has mostly just gone up.
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