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Facebook’s recent name change – the economic impacts

Facebook makes the decision to change its name to Meta. In an African language, – Meta stands for “3”. Facebook’s decisions stem from an idea to have Facebook, Instagram, and WhatsApp all come under one umbrella just like when Google decided to name its parent company Alphabet.

Economically, due to how Meta is connected to people and businesses, its development as well as updates to its acquired apps, the lowering of marketing barriers, the stimulation of innovation. All of these indicators show that Meta will continue to enable global economic activity.

However Facebook Inc i.e. Meta gave a warning that it expects revenue growth to slow down “significantly”  by 2022. While its profits have more than doubled to $10.4bn in the second quarter, it warned that its growth rates will decelerate significantly on a sequential basis over the next year. These are mainly due to financial, privacy, regulatory controls as well as operational challenges.

At the beginning of October 2021, all social media platforms owned by Facebook Inc experienced a 6-hour downtime, throwing users all over the world into a panic frenzy. Although the world seems to have moved on from the awkwardness of the situation, it is unlikely that the company has, especially considering how much revenue is lost to the outage.

Some reputable news outlets like The Associated Press and Snopes have estimated Facebook’s loss to be about 79 million USD based on the latest financial report published by the company for the second quarter of 2021.

While individuals may have recovered from the initial discomfort, it is not certain that Zuckerberg has recovered from the ramifications of the downtime yet.

But it is unlikely that he is the only one still smarting from the effect of the glitch across all his social media and messaging platforms. Many businesses and organizations worldwide depend on these apps for their corporate activities, including publicity, sales, and advertisements. In fact, Facebook is known to generate an overwhelming percentage of its revenue from advertisements, and it is based on this common knowledge that business analysts and other social spectators have tried to guess the amount Facebook lost in the hours it experienced the outage.

How much are we talking about here?

A loss to the tune of 67 million USD has been reported by some, but it would seem this is one of the rather modest figures circulating on the news. Other sources claim the loss is about $79 million (which we’re more inclined to believe), and some put the figure at about $100 million. Regardless of which report is closest to the truth, the amount of money being discussed here can drive many corporations to an irreparable collapse.

The most recent financial report published by Facebook for the second quarter of 2021, lasting between April 1 and June 30, revealed a budget of approximately $29 billion in advertising revenue. This put its revenue at $318 million per day and $13 million per hour on average. Next, considering that trusted news outlets like The Associated Press and Snopes reported that the social networking applications became inaccessible by morning around 11:40 a.m. and didn’t fully come back up till about 5:40 p.m., the outage can be said to have lasted about 6 hours.

Conjectures about the total revenue lost to the six-hour outage have been based on the assumption that not a lot would have changed in the budget decisions and financial figures between July and September. Thus, one would not be wide off the mark to guess from the company’s most recent financial report. To this end, one can conclude that the company has risked a revenue loss totaling $79 million.

Facebook’s loss: the Domino effect

This revenue loss is a difficult situation for Facebook to have to grapple with, especially following the whistleblowing saga involving it and one of its former data scientists, Frances Haugen, calling the company out on the toxicity of its decisions, activities, and products. The piece, which was published in The Wall Street Journal, promptly influenced a plunge in the company’s stock value.

It is now clear that for a company that was already fast losing its goodwill in politics and public perception, the outage is more or less a nail in its coffin. Already, users, and even the US Federal Trade Commission (FTC), are beginning to protest the monopoly that Zuckerberg reportedly enjoys in the market. Consequently, a bill is underway to compel the billionaire to split up his companies and to restrain his ability to acquire rival companies in the future. Suddenly, people are being jolted to the realization that the company is not infallible after all and that it cannot be fully relied on to provide stable business and entertainment support. This unfavorable perception has reflected badly on the company’s market worth.

Currently, the Facebook founder’s wealth is reported to have depleted by about $19 billion, bringing his net worth down from almost $140 billion to $120 billion, and making him the 5th wealthiest person in the world, after Bill Gates whom he once surpassed on the list.

Is this the end of the road for the company? And is this another reason why the company has chosen to change the name of the parent company from Facebook Inc to Meta?

Quite unlikely. It appears that this is just a storm that will pass, even if it might take a little while for the company to bounce back from the financial loss. Also, it may put a halt to some of the upcoming projects. Speaking of projects, Zuckerberg has got some tricks up his sleeves—some sophisticated virtual reality product he hopes to launch soon, which he calls the “multiverse.” To achieve this, he plans to employ about 10,000 more workers. Hopefully, this sort of news will put the company in a good light and create the good publicity needed to help the business sell its products and recoup its losses. There are also plans to transform Meta from just being a social media platform into a metaverse company (hence the name Meta) in the next 5 years. Insights into this are to see people use virtual reality headsets to work, play games, and also perform other activities like surgery over the internet.

Meta also says that it is expecting to invest over $21bn in 2022, so with all this in mind, it is quite reasonable to accept that Meta’s plans for investment in the future still remains intact – leading to greater economic impacts that will have an effect on Meta itself as well as the financial markets and the economies as a whole.

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