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Bernstein VP of U.S. Internet Mark Shmulik joins Yahoo Finance Live to discuss Facebook's evolving business model, the metaverse, and the challenges that the company faces.
KARINA MITCHELL: Meta share is up today by about 3%, but it has had a tumultuous ride since whistleblower revelations and backlash against how its social media platforms deal with violence and teen imaging. Here to help us discuss the reasons why the tech giant finds itself hovering near bear territory is Mark Shmulik, Bernstein vice president for the US and internet. Sir, thank you so much for your time today. So as I say, Meta stock is up today, but erasing about $220 million-- billion-- million-- sorry-- in its market cap recently. You know, what's driving this mass exodus from these shares? Because it's not just the omicron variant, is it?
MARK SHMULIK: No, and first, thanks for having me. You know, I think the biggest driver behind Facebook now trading well below its peak earlier this year, I actually think comes back to just core advertising and the IDFA-related headwinds, recall, with Apple's changes to, you know, how you can effectively deliver and measure advertising on mobile devices. Facebook was effectively the leader in that space. And so what we're seeing is effectively the IDFA impacts permeating not just with Facebook, but you see it across many of the digital ad names-- Snapchat, Twitter, Pinterest, et cetera. So it's certainly been an industry wide, I'd almost say, sell-off, as we've learned the IDFA effects are real material. And it's going to take time to work through that.
Now there's certainly other things kind of compounding it that we're seeing with Facebook and now Meta. You know, certainly the revelations you mentioned, but we're also going through this whole renaming change, as investors try to digest and underwrite what exactly is the Metaverse and, you know, the $12 billion plus that they're spending on that initiative this year.
ALEXIS CHRISTOFOROUS: I guess, Mark, though, even though it's changed its name and it's looking ahead now from, I guess, being a company where you can share experiences to a place of shared experiences, but isn't Facebook still going to be followed by all of the legal issues, you know, and also the technical issues? I mean, there were yet more glitches over the weekend with Facebook, Instagram, WhatsApp. You know, how does the company, I guess, shake those things? It's going to take a lot more than just changing the name, obviously.
MARK SHMULIK: No, of course. And, you know, it's certainly not lost that through some of my investor conversations, there's been a lot more jokes about what exactly is the Metaverse, which is certainly a different narrative than what we had the previous two months, which were far more serious in its nature. But, you know, in my view, I think many of those challenges, whether they're coming from, you know, media or technical or regulatory, I don't think those go away. I think that's just a part of doing business as a large company in an uncharted space, which is exactly what Facebook and now Meta is effectively operating in.
And, you know, we've seen this pretty much since I think the Cambridge Analytica scandal broke. You know, there's constant news flow, and there's constant kind of [INAUDIBLE] around how to think about what effects many of these issues have and what's the role of social media and society. Those just aren't going to go away. You know, that's going to continue. And we've certainly seen that reflected in I think the multiple, at least, of which we see Facebook trade at.
KARINA MITCHELL: And Mark, I want to turn your attention to, you know, its ad platform. Obviously, that's a tremendous source of revenue. Do you think that there will be a move away? Has there been a move away by some companies, you know, because of the imaging and because of all the revelations that came from the whistleblower about how it reacts to violence on its platform and about teen imaging as well? Does that sort of cause, you know, advertisers to maybe walk back a little bit?
MARK SHMULIK: So far, at least in my conversations, I haven't seen that. You know, and part of it is really separating out the news flow versus, you know, I would argue, the reality of what's actually taking place on the platforms. You know, and the number one thing that advertisers look at, I would say, is, you know, what types of content is on the platform. And as an advertiser of a specific brand, how do I feel about my brand being adjacent to specific types of content?
And so we've certainly seen that type of activity and that type of an advertiser behavior, effectively speaking, with their wallets in the past. We certainly did have a boycott if you recall at the start of the pandemic, where many advertisers effectively walked out for a variety of reasons similar to some of these issues. And I believe Facebook's done a decent enough job addressing those issues that advertisers have effectively come back to the platform and have continued to embrace it.
KARINA MITCHELL: All right, well, we will leave it there. Meta certainly has a lot of issues that it is facing, including slowing subscriber growth here in the US. Mark Shmulik, Bernstein VP for the US and internet, thank you for being with us today.