Facebook's goal is to do whatever Zuckerberg wants, since he still controls a majority of the votes. It's a fascinating test of the value of corporate governance rights.
60-80% of the cost base in many F500s is bullshit (exceptions exist. FMCG, any industry where physical products make up their balance sheet. Not salaries). Any excuse to avoid returning money to shareholders.
Everyone quietly acknowledges. If say, Visa, really tried, they could cut the cost base by 50% and achieve the same output.
Carl Icahn style shareholder activists have a point.
Forget tech companies. Most public companies are a conspiracy by VPs/C-suite/board.
The difference with tech companies is Google feather-beds its EMPLOYEES with free food.
From a pure capitalist standpoint. You could run Facebook's business on 20 billion USD in costs. Their cost base is enormous because Z has ZERO interest in cutting costs.
He's in it for the ego/vanity. Same as every other F500 CEO/Chairman.
Ego is the driver, not the balance sheet.
Carl Icahn story about cutting costs: https://www.youtube.com/watch?v=WSatPoD2W-o - fired a building full of people, never heard about it again.
Most companies are run as bureaucracies, dual share classes haven't helped. There is no difference between your average Google employee and a civil servant.
Unfortunately, this is a pretty raw deal for shareholders. You cash out insiders, the bureaucrats move in, the amount of cost extends to the revenue base, eventually revenue slows down (bureaucrats don't tend to be good stewards of capital), the rats all leave the ship, you find out the cost base could have been 50% smaller all along, and you are left with a stock on its way to bankruptcy.
as part of an already very good compensation package.
- We should go for something akin to universal basic income? Given we could produce a bunch of output with very few people (I guess at that point it's more and ideological question of if these few people that get to stay + shareholders are going to get all that value rather than someone else) - People that are talking about "productivity growth" has declined the past 20 - 40 years, are probably wrong and we have seen productivity growth, we've just filled it up with useless stuff and made up jobs? - It also sort of implies that some of the projects that Google and Meta has taken on even though not financially sound right now haven't produced any value for humanity (and I fully understand that in a capitalist society; profits are the way we value things). I think they have and a lot do (like long tail stuff like producing knowledge, producing open source tech, driving tech that while not mature now, will explode in the future, VR + self driving comes to mind)
Another thing that comes to mind when it comes to founder driven companies doing whatever they want is all the Elon Musk companies. He has also made a bunch of crazy bets that "value"-companies would def not have made.
> What is clear is that Zuckerberg in particular seems more committed to VR than ever. It may be the case that he is seen as the founding father of the Metaverse, even as Meta is a potential casualty.
My guess is this is going to be a really rough winter / several quarters for Facebook until they reconsider.
Zuckerberg seems to envision matrix-style VR where it's 24/7 immersive and nobody outside a very small fringe group is at all interested in that proposition. I just fail to see the value proposition of VR socialization over video and even voice calls. If you'll recall even video calls have only really caught on since the pandemic - skype did business pre-pandemic, but it was still a fringe tool for social purposes and much more likely to see use in a work setting. It might be that VR can break into the workplace - but I have my skepticism.
I agree with you VR is not the future but AR definitely is, and even Apple has been making silent but consistent investments in AR for more than the past 5 years.
It's interesting to see the differences of opinions on this subject. I believe this will pan out in the opposite direction.
As a consumer, AR seems so weird to me. I don't want to put on glasses or goggles to see overlays of the world around me. I want interfaces to be simpler, not more complicated and crowded.
While AR hardware has improved, the software remains reminiscent of Nintendo DS Face Raiders [1]. I'm just not being sold on a day to day use case for the tech. Maybe Apple or Meta will teach us otherwise, but I can't even imagine it at this point.
I do see AR being useful for a limited number of industrial applications. You already see quasi-AR virtual film cameras working well (cameras without a lens that capture xyz-orientation in virtual space for the purpose of pointing a virtual camera). But these don't even use optical overlays.
On the other hand, VR enables infinite workspaces, telepresence, new kinds of 3D creative tools that place you inside the thing you're building, world isolation, closer to full sensory immersion, etc. Rather than a tool that serves as an overlay of the existing world, it puts you into a new type of cognitive body altogether. Metaphors of movement combined with spatial reasoning can unlock new abilities for the human brain. Like gestures, but full body and mind.
You can already see the advancement of AR software by holding up your iphone and trying out the various AR features that overlay things in the real world and can even use the depth sensor to occlude your hand. Or try out Google maps AR view which literally does a video game style overlay of the path you need to take over the actual world. Maybe you don't like these things, but I think they are objectively cool, and right now only held back by a lack of hardware to make it convenient to do AR in every day scenearios (lightweight glasses or goggles). But, Apple is working on that, and so is Meta, and since technology advances by Moore's law it's only a matter of time before the glasses get light enough and comfortable enough that we don't have to hold up our phones awkwardly in front of our faces to do AR.
Things that AR can accomplish:
1) Overlaying peoples' names so I don't have to remember so many names. Not a problem for many people but some people have a hard time remembering names. 2) Always there real world overlay of directions so you don't have to keep pulling out your phone. 3) AR games and entertainment 4) No need for giant physical 2 dimensional information displays in the real world. Once AR gets sufficiently clear and high enough resolution there is literally no need for physical displays... only virtual ones. The whole point of physical displays since inception is to show information, sometimes 3D information, on a 2D surface. We've been trying to make them smaller and smaller ever since... what better size than no size at all. 4) The whole point of any digital display is to augment our eyes with information. The ultimate display is one that is right in front of your eyes. AR is the next logical step for digital displays.
I will give you one case where I would give in, though: automatically translating and overlaying foreign text. I'd wear a set of AR goggles if it improved the experience of visiting countries that don't predominantly speak English.
As a counter anecdote, I fully support AR - the idea of Google glass would have been very appealing for me if they could actually use the lens as the screen and it was less bulky.
Perhaps it's just years of seeing heads-up displays in anime and sci-fi movies (e.g. Terminator) that's pushing my desire.
If they can eventually solve the bulk and creep issue (ie, always-on camera that can surreptitiously record at will) it will become a useful addition to the phone/watch personal nimbus of data.
Anyone who knows the digital gaming industry understands. Content is hard.
The Metaverse seems like it has Zuc supplying a vast amount of first party content, instead of integrating with third parties better to supply skins and content.
There’s really only one company in the world that’s able to do that better than anyone else. You guys know which company that is.
So it’s very very hard for them to be as successful in that space
The physical product creaks and groans, and the software UI is android level.
Tesla just has the convenience of competing with luddites
They can extend that to these voting class shares imbalances and start a cascade of changes
People who value stability and work-life balance. It's great for people who see a job as a way to fund life and put something away for security later in life, not as a calling they're willing to sacrifice everything for.
It will eventually be a problem (in the sense that switching to GOOG or AMZN will be a much better prospect) if the stock continues to go down, of course. And a new hire evaluating their stock package should probably be a little concerned about the trend.
The infrastructure to support you getting your work done is great. There are reasonably interesting software problems to solve. There are smart people to work with. There are some good benefits.
Never mind the convoluted tax implications of exercising options that are nominally not underwater, but whose stock has a lower value that at the time of granting.
If you factor in taxes, you could end up owing more in taxes than the shares are worth (ex: vest price is $10/ea, taxes are $3/ea, current price you can sell at is less than $3 == underwater).
I think Aurora employees were locked out for 180 days, but force to exercise options at IPO price.
[0] - https://www.cnbc.com/2020/08/28/nearly-200-uber-employees-su...
Think about it this way: Giving 20 billion in new equity per year when the market cap is a trillion dilutes everyone 2%. When the market cap is 500 billion you are now diluting everyone 4%.
When the company is growing you don’t see the dilution as the increase in stock price is much higher. When it’s static this drags your shares down over time.
No, Mark wants a war chest and will increase investments for his meta verse.
But I would never bet against Mark.
I remember when Facebook was invite-only. It was cool. Everybody wanted in. This... I think this is grounds to bet against Mark.
You didn't read TFA, the earnings report explicitly saying the significant amount of buybacks they did.
I think that's part of the problem to be honest. People who have a reputation for never making mistakes tend to double down rather than acknowledge the mistake and back off.
Imagine going straight from your early 20s into a position where you're hailed as never making a mistake. IG, whatapp, etc all panned out. What happens when you finally do spend $2billion on a failure such as oculus? Do you note the failure and back off or do you start spending $20billion a year, change the company name and double down (to the power of 8)?
Anyway at least this instance of it is more harmless than Putin's example in global terms. It's still reasonably clear to me what's happening though.
No buybacks, like this?
At least from my experience.
META more than other big tech companies has been scaling back significantly this year and were one of the first to do so.
They're also buying back a ton of stock and with operating margins in excess of 80% it's almost insane how conservative they've been with spending money over the years. This is hardly a "growth at all costs" company. This is one of the most profitable companies ever.
META also isn't going "all in" on the Metaverse. They're investing a portion of their cashflows on AR/VR technology. The media is so focused on the headset that I think people are missing the fact that in a lot of ways META is inventing the wheel that will support the AR/VR products of the future. Even if they don't make a success of their Metaverse, their technology will still have real value to the ever increasing number of companies operating in this space.
TL;DR: META is trading as a value stock, they are cutting back, they are returning a ton of profits to shareholders, and they're not going all in on growth or the Metaverse.
Part of the reason Meta is crashing is because they are being even more aggressive/spending more on metaverse next year than they previously stated.
19% growth in costs while having -4% revenue over the year ago quarter.
https://investor.fb.com/investor-news/press-release-details/...
June 30, 2022 $5.233B
March 31, 2022 $9.506B
December 31, 2021 $20.06B
September 30, 2021 $13.46B
Last Q they made 209m in revenue on other bets, and lost 1.6b on those bets.
The only profitable business for Google is Ads.
Cloud, and other bets burn about 3b dollars every Q.
That's like asking Apple how much money it made from sources other than hardware sales and online service sales.
and
> the journey ends and you have to reorient the business (imo)
Isn't that the point of reorienting themselves to the meta verse. It is a new, unconquered land with virtually unlimited space and possibility?
Man, why does everyone have the same values nowadays as Milton Friedman and The Warthog?
Relevant video clip: (NSFW, very offensive language) https://youtu.be/7j1850-qlm8?t=19
Facebook's (stated) mission isn't to make money or get big, it's to bring people together. If they can make VR user-friendly and ubiquitous, I think that will serve their stated goal.
If Facebook just decided to hunker down and count their money, they'd be doomed to eventually fade away just like so many tech juggernauts have in the past.
The business plan so far seems to be:
1. Make VR work
2. ???
3. People come together!
Smallprint: make lots of money along the way...
I am interested as to whether there exists a concrete plan for step 2 but I am dubious of this direction.
Difficult to make them come together without throwing up, literally. I almost got to the point where only thinking about the abstract concept of VR makes me a little dizzy.
But the logic goes something like this: Zuckerberg has built a $1 trillion company already => he knows what he's doing => we should trust him with the tens of billions of dollars he's throwing at this, trust him that is compared to the schmucks that say that this won't go anywhere, they haven't built $1 trillion companies themselves.
I predict that around the mark of $100-150 billion thrown down the VR drain some share-holders will actually start to throw some hard questions at Zuckerberg, and in another one or two years after this the project will have the fate of Google+.
If you could toss on your VR helmet for 2 minutes to pop into VR and chat with someone the way you can open a Zoom call today, it'd be a huge quality of life improvement for remote work. Or like Carmack was saying recently, you could get to a point where it's cheaper to mail out a thousand headsets than to host a conference in person
Tangential edit: Man, how nuts is it that Facebook is throwing billions of dollars a year into this? Palmer Luckey invented modern VR in his spare time as a kid living in a trailer next to his parents' house. You've got VR startups out there making interesting devices, amazing multi-user worlds, and all sorts of other things for a few million bucks per company. It makes sense that if they have the money they should try to do something useful with it, and silicon valley engineers/hardware development don't come cheap, but that's just such an incredible amount of money.
Look where they were in the mid 90s when they were already 20 years old compared to where they are now.
Apple and Microsoft are much more mature companies than Facebook is. Microsoft had major restructuring a couple of years ago. And I think Apple also had some major reforms internally around 2015-16 to make its operations more efficient. Apple accumulated a massive amount of cash over that period.
I am not as much into it anymore as I sold most of my holdings near the end of the pandemic. So maybe things have changed since then.
Netflix is another company I have serious questions about. Not sure about their current situation but around 2017 when I looked into them, they were essentially a company that sells you a dollar for 99c. Their ratio internal content/external content was not high enough which meant they had massive recurring licensing costs which they funded by a mix of subscriptions revenue and debt (a lot of debt). The story was that that would be ok once they reached ‘scale’ as costs would be the same but they would have more subs. In my opinion that logic is flawed since presumably the cost of the licensing deals will also rise as more players entered the market and content holders got less money from traditional sources (because everyone uses those subscriptions services now). Netflix made sense when they were able to buy the content for cheap because they were niche.
My opinion of course. Im just a random dude on the internet.
On the Apple side, the iPod, iTunes, the iPhone, the iPad, and the watch were all unproven projects.
On the Microsoft side, giving up immediate revenue from selling Office for $600 - seat into a subscription service for $69-$99 a year had to be a short term revenue hit. Not to mention XBox which loss billions before becoming successful and Azure.
Meta doesn’t have a choice. I really hate the Facebook product. Not because of the privacy angle, it commits the worse sin of any product - it just sucks now. Most of the post I see aren’t even from people let alone brands and websites I chose to follow.
Realistically they had one big growth avenue and that was acquisitions but the regulatory (or rather political) environment doesn’t allow for it.
I get that it is hard to let go of that growth mindset after 20 years of crazy growth but at some point the journey ends and you have to reorient the business (imo). I am not saying stop investing but scale it down a notch, set realistic budgets, pay a dividend or buyback stock. Maybe if they had shifted their mindset away from growth at all cost earlier they wouldn’t have gotten such a bad rep.
I feel the same about Google. I wonder how much money their non-ad, non-cloud stuff made of its life time and if it has been profitable.
In the end the goal of a company (whether you agree with it our not) is not to get as big as possible but to generate as much cash for its shareholders as possible. And I think Facebook over extended with going all in on Meta.
But perhaps I am looking at this with too much hindsight.