Investors are showing lenience for Meta CEO Mark Zuckerberg as he spends billions on creating the metaverse. With double-digit revenue growth and the stock increasing by over 160% this year, it's clear why. Zuckerberg has asserted that this is the way the world is headed, regarding the metaverse.
Mark Zuckerberg of Meta is once again a popular figure on Wall Street, in contrast to Snap CEO Evan Spiegel. Both experienced a beating from Apple's iOS privacy alteration and a general economic tumult in 2021, including inflation, rising interest rates and the Ukraine conflict, leading to decreased ad income and investor retreat. These circumstances created a need for extensive layoffs.
The dissimilarity between the two companies has been made clear this week. On Wednesday, Snap shares plunged 14% after a poor forecast was issued the night before, while Meta stock leapt 7% after hours when their report demonstrated double-digit growth and a hopeful prediction for the third quarter. Nearly 160% of Meta stock value has been gained this year, compared to a 20% rise in Snap, which is match with the S&P 500.
Meanwhile, neither executive has any intention of restraining their spending on technology advancements. Meta is deploying billions of dollars each quarter on its vision of a metaverse, and Snap is funding augmented reality offerings and services, as well as promoting the advantages of artificial intelligence. The difference lies with Meta having optimised their expenses. While Snap's revenue decreased 4% during the second quarter, Meta is now firmly progressing, buoyed by the thriving ad business of Facebook.
Meta Chief Financial Officer Susan Li informed analysts on the earnings call that advertising revenue had surged due to more spending by online retailers and Chinese companies, following the pattern from the previous quarter. Li also mentioned that online advertisers have been taking advantage of Meta's Advantage+ service which, analysts have deemed useful in fixing the disruptions brought about by the iOS privacy change. "We have found that this effort has resulted in substantial growth in conversions in Q2," Li voiced. Even so, analysts probed Zuckerberg on the call about the viability and wisdom behind Meta's investment in the metaverse, and expressed anxiety around the losses piling up in the company's Reality Labs division. Zuckerberg has made the case that the company needs its own platform, similar to how Apple has iOS and Google has Android, in order to be able to distribute its apps, such as Instagram and WhatsApp. The metaverse is his vision of a world where this is possible. Even so, during the call he acknowledged that success in this endeavor is not a guarantee and could take up to a decade. Meanwhile, Snap CEO Evan Spiegel has presented AR projects as an extension of the core platform meant to broaden the user experience, not just a 'new bet.' An analyst, however, noted that if the company is devoting a lot of resources to lengthy projects without any visible returns, the balance sheet may suffer. Meta, at this point, have resolved their ad issues, something that Snap continues to struggle with. According to an Atlantic Equities analyst, Snap is not faring well because of the extra expenses devoted to AI, which are supposed to optimise ad targeting while maintaining attractive returns for the investors.
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