Facebook Inc. or Meta Platforms Inc. as it was recently renamed, is one of the world’s largest social media companies both by users (2.9 billion as of FYE2021) and by revenues generated ($117.9 billion for FYE2021). It was incorporated in 2004 and has grown exponentially over the past decade. Despite its impressive revenue generation and relatively low Cost of Sales (COS), other social issues affect the brand and will be considered in this analysis.
Facebook has experienced several legal issues relating to consumer privacy. Even its former employees have acted as whistle-blowers against the company. One reason why it is difficult for Facebook not to infringe on the privacy of its users is that they make most of its money from advertising. For Facebook to provide a better advertising experience for its customers, it has to collect more personalized data. Immediately here you can see the conflict of interest. On the other hand, Facebook’s users need to understand that nothing in life is free. Either Facebook’s users would have to pay to use its service, or they will have to pay with their data. This is the inevitable truth that most Facebook users will have to face head-on. If this was presented to its users clearly, most users would still choose to give up their data to access this social media platform that is so ingrained into our daily lives. One of Facebook’s companies, WhatsApp, recently had a change in its user policy. Even though many wanted to opt-out, which would mean opting out of WhatsApp entirely, they chose not to. This is because many cannot imagine living a life without WhatsApp. Even with new competitors like Telegram coming into the space, WhatsApp continues to dominate the private messaging space.
Some say the recent rebrand to Meta is Facebook’s way of moving away from the negative publicity that has been created around the brand. Others say that Meta is a way for the brand to get even more revenue from advertising in the metaverse. No one truly knows their true intentions, but we know that it must be important for them to rebrand a company that has been in existence for almost two decades. The advertising argument cannot be ignored because it is the main revenue source for the company at over 95%. There are some analysts that believe that Facebook needs to diversify its revenue streams, while others follow the adage ‘If it’s not broken, don’t fix it.’.
In comparison, Twitter Inc, another technology company has also been growing year on year but has 10 times less revenue than Facebook. Despite this, Twitter achieved a balance sheet size of $14.06bn as of FYE 2021. Owing to the number of users on the platform, Twitter is seen as a digital town square. In addition, Twitter has had its fair share of social issues bordering on freedom of speech.
With the above information, my team did a financial analysis to assess the operations, performance, and financial position of Facebook Inc. (Meta Platforms, Inc.) in comparison to Twitter Inc. over the review period FYE 2012 to 2021.
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