We may now be entering the next phase, where disruptors are increasingly being disrupted themselves — as regulators and competitors catch up and/or companies are cresting the top of their S-curves. This, we think, is Meta’s biggest problem today — after years of strong growth, the pace is levelling off as its core business matures.
We are certain you would have read about Meta Platforms’ (previously Facebook) spectacular meltdown last week. The stock lost more than US$230 billion in market value, the biggest single-day loss in US market history, in the immediate aftermath of its weaker-than-expected earnings and outlook guidance. That is equivalent to S$310 billion, or RM960 billion, which, incidentally, is more than half the total market cap for the entire Bursa stock exchange. At the time of writing, its shares have fallen nearly 32% in less than a week.
Many tech companies have enjoyed lofty valuations over the past decade — on the back of historic low interest rates (cheap money) and the promise of strong top-line growth as technology disrupts many traditional industries. Meta’s Facebook social media platform rode high on this phenomenon. Its user base grew very rapidly, thanks to the vaunted “network effect” — where each new user adds to the value and experience of all other existing users. You are on Facebook because all your friends and family are on Facebook. The platform collected massive amounts of user data and is, thus, able to very effectively provide targeted marketing for businesses — winning advertising dollars from other traditional forms of non-digital advertisements, including print media. There was plenty of pain for the disrupted and, perhaps for some, Facebook’s meltdown last week is a schadenfreude moment.
