ALEX BRUMMER: Could Meta be first Silicon Valley giant to go ex-growth? It wouldn’t be great for UK funds who bought into Facebook immortality
How sobering it will be for investors who have put their faith in big tech that Facebook-owner Meta’s shares plummeted by 26 per cent in the past two days.
To put that in context, it is a fall of £175billion, almost all of the value of Unilever and Glaxosmithkline added together.
It would be easy to paint this setback for Meta as just another gyration on the Nasdaq, which trades the biggest beasts in the equity universe as if they were penny stocks on London’s AIM market.
Backs to the wall?: Facebook founder Mark Zuckerberg’s unwillingness to submit to the norms of good governance are closing in on him
There are indications that bigger things are afoot. Facebook founder Mark Zuckerberg’s unwillingness to submit to the norms of good governance are closing in on him, particularly in Europe.
In Britain, the Competition and Markets Authority has just fined Meta £1.5m over its purchase of online animated GIF maker Giphy. That amounts to just a flea bite for Facebook. But the regulatory net is closing in, with plans to crack down on the web giants over people smugglers, fraud and revenge porn.
In the US, the Federal Trade Commission is limbering up for an anti-trust fight.
The bigger threats to Facebook are technological and commercial. Meta says it is building the world’s biggest supercomputer for handling artificial intelligence (AI).
As Zuckerberg hatches his latest plot to be master of the universe, the Chinese are beating him to the punch without a power draining supercomputer.
Facebook has the astonishing number of 2.1billion registered users worldwide. However, it is no longer adding users at exponential rates, if at all.
A social media site which began life among Harvard students, and was embraced by young people across the globe, has become staid and has fallen out of fashion, in spite of owning Instagram. It remains a huge force in digital advertising. But science and tastes are moving on.
By all accounts, Tik Tok has stolen a march on Facebook. Chinese AI is able to track the popularity of each of its short videos. The software monitors how good the videos are in encouraging the return of users and deploys the data to upsell digital services.
While Zuckerberg’s supercomputer plays catch-up, the longer-term threat to Meta’s hegemony looks very real.
Instagram, its fastest growing arm, is slowing in its acquisition of monthly users with projections showing a fall of 5.8 per cent this year and 3.1 per cent by 2025. This is a far cry from the 16.5 per cent gain seen in 2021.
Facebook is blaming the slowdown in usage on the end of lockdowns and pouring billions of dollars into TikTok-style video clips on its Reels platform.
That could be the start of the Meta fightback. But it is just possible that Facebook will be the first of the Silicon Valley giants to go ex-growth. That wouldn’t be great for those UK funds who have bought into Facebook immortality.
President Putin is playing the West like a fiddle when it comes to energy.
Should the US and its Nato allies decide to impose financial sanctions on Moscow, because of threats to the Ukraine, Putin has the option of cutting natural gas flows to Europe and refusing to activate the new Nord Stream pipeline.
Putin now seeks to insulate Russia from the economic impact of cutting off supplies to the West by signing a deal with President Xi to supply an extra 10billion cubic metres of Russian gas to China from its Eastern fields.
Geography may prevent gas bound for Europe being diverted to Beijing. Moscow’s supply deals with Beijing will mean it is no longer as dependent on euros and dollars.
The UK and Europe’s vulnerability to gas cut-off by Moscow has been eased by the diversion of US liquefied natural gas (LNG) resources to Europe. That brought down the wholesale price of natural gas sharply in Europe in December.
But it is far too late to make any difference to the UK’s energy price shock.
Among the big four central banks – the Fed, the European Central Bank, the Bank of England and the Bank of Japan – there is only one holdout on tightening policy.
Japan’s big fight is against deflation rather than rising prices.
Consumer prices rose by just 0.5 per cent in December, way below the BoJ’s 2 per cent target. After decades of deflation, there is belief among Japan’s households and businesses that price rises will be absorbed and wages won’t rise. What a contrast.