Why the timing of Sandberg’s exit from Meta is terrible given severe challenges
On 1 June Sheryl Sandberg, Meta Platform’s (FB:NASDAQ) chief operating officer, trusted lieutenant and ‘the first real adult in the room at Facebook’, announced her departure from the business.
Sandberg’s exit comes at a time when Facebook-owner Meta’s growth has slowed to single digits and risks destabilising a group that faces a series of structural problems.
The severity of the obstacles facing the firm is reflected in the 40% decline in the share price over the last six months.
It is worth putting Sandberg’s tenure into context to illustrate how her exit could affect the company’s ability to address the issues it faces.
Having joined in 2008, Sandberg had a key role in turning the company from a fast-growing but loss-making leader in the nascent world of social media, valued at between $3.75 billion and $5 billion according to contemporaneous reports in BusinessWeek, to a global advertising giant with quarterly net income of nearly $7.5 billion, and a market valuation of more than $500 billion notwithstanding the recent collapse in the shares.
In its existing business Meta faces increased competition from TikTok and Snap (SNAP:NYSE), and Apple (APPLE:NASDAQ). And Apple’s new anti-tracking software is estimated to have cost the group around $10 billion in ad revenue in 2022.
And there are a number of reasons Mark Zuckerberg’s vision to create a first mover advantage in the metaverse (a series of interconnected worlds that enable participants to interact with their digital objects and avatars) could be knocked off course.
Meta is investing billions of dollars to develop its vision of the metaverse. In 2021 the group spent $10.2 billion, equivalent to 8.6% of its total annual revenue on its Reality Labs business. This division is responsible for developing augmented and virtual reality headsets and software.
However there is no guarantee that Zuckerberg’s vision of the metaverse will become profitable.
The short-term success of this play on augmented and virtual reality or VR is contingent upon the widespread adoption of a new high-end VR headset named Project Cambria, which features cameras that pass high resolution full-colour video to the headset’s screen. This innovation is accompanied by big technical challenges.
Zuckerberg also faces competition from other extremely well resourced technology companies. Microsoft (MSFT:NASDAQ) is investing in its own version of the metaverse, with the aim of improving remote meetings.
Online game platform and game creation system company Roblox Corporation (RBLX:NYSE) already has its own well-developed metaverse which allows gamers to create and host their own game worlds.
And Nvidia (NDVA:NASDAQ), which designs graphic processing units for the gaming and professional markets, is investing in its own Omniverse. This is an open platform built for virtual collaboration and real time physically accurate simulations.