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Facebook was on the defensive for years—until the metaverse came along

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Despite the hit to its stock price this week, Facebook parent company Meta is still the dominant social media player in the world, with close to half the global population using its apps. The company still owns a quarter of the digital advertising market, second only to Alphabet’s Google. And the Oculus virtual-reality platform, which Facebook bought for $2.3 billion in 2014, has an estimated 35% market share in VR headsets.

So why is Wall Street punishing the stock, erasing 20% of its value this week?

It’s not just the fact that the Facebook app lost daily users last quarter for the first time ever, or that Apple’s privacy changes could produce a $10 billion hit to revenue this year, though those certainly were the big factors in the 25% one-day share price drop that followed the company’s Feb. 2 earnings release.

The longer-term worry is that most of founder and CEO Mark Zuckerberg’s seven new investment priorities—Instagram Reels, community messaging, commerce, advertising, privacy, artificial intelligence, and the metaverse—are not about leading, but catching up.

These investment priorities are “reacting to a current-day strategic disadvantage,”  Needham & Co. analyst Laura Martin wrote in a client note cited by Barron’s. “The issue with being late…is that it is often more expensive to catch up than to define the marketplace from scratch.”

Facebook is the king of copycats

The truth is, Meta has been on the defensive for years.

In 2012, Facebook bought Instagram for $1 billion. In 2013, it tried to buy a two-year-old Snapchat for $3 billion, but co-founder and CEO Evan Spiegel turned Zuckerberg down. Since Facebook couldn’t buy Snapchat, it did two other things: It bought WhatsApp for $19 billion in 2014—and copied nearly every aspect of the Snapchat app, including the “Stories” format that Snapchat introduced in 2015, with static content that disappears after 24 hours.

The copycat reputation cemented itself when TikTok started taking hold around the world. In response, Facebook threw together Instagram Reels, a soulless, half-baked version of TikTok’s vertical video format. Many Instagram Reels are simply repurposed TikToks—many featuring the famous TikTok watermark applied to any video made within the TikTok app.

Facebook had successfully copied Stories on Instagram, and eventually on Facebook and WhatsApp, too, but it couldn’t replicate TikTok, a platform more concerned with community and interest areas than followers and likes.

Facebook and the metaverse

It’s hard to remember the last time Facebook, now called Meta, introduced a truly unique and innovative product. The same can be said about Apple, a similarly dominant company, in the years since Steve Jobs’ death. Both companies appear more interested in protecting their respective leads than actually building new products.

But the coming metaverse could change the narrative.

Facebook’s transformation into Meta reflects a stated desire to build an immersive, next-generation internet that relies on augmented and virtual reality. The metaverse is not an original idea by any means: It’s a concept from the 1992 Neal Stephenson novel Snow Crash. And the timing of Facebook’s metaverse announcement was conspicuous—I called it Facebook’s best public relations campaign ever because it successfully distracted from the Facebook Files whistleblower leaks that dominated headlines for months in late 2021.

But building the metaverse is perhaps the most innovative thing Facebook has taken on in years. While most of what the company has shared thus far has been vaporware—technology that doesn’t really exist yet—Meta has signaled a willingness to move beyond the social media space toward something unbuilt and unknown.

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