What will the market think of FB

I mentioned in class that Facebook might not only be exposed from a regulatory perspective, but also from a markets / valuation perspective. The below article outlines such an investment thesis quite nicely. Here are some of the main points with a hint of my own editorialization. 

First, as the article notes "it has become fashionable among Facebook critics to emphasize the company’s size and dominance while bashing its missteps" BUT how is the Company actually performing? Might its size / valuation be unsustainable? 

Two key observations:

1. Facebook has been declining among teenagers for a long time; so much so that internal research indicates a 45% daily usage rate by 2023 - "FB is for old people"
2. A shift towards pushing users into content that was likely to generate "outrage" and "anger" has perpetuated this trend (think of your crazy anti-vax uncle becoming Facebooks primary demographic)

Second, where are its users going? "Facebook’s research tells a clear story, and it’s not a happy one. Its younger users are flocking to Snapchat and TikTok, and its older users are posting anti-vaccine memes and arguing about politics. Some Facebook products are actively shrinking, while others are merely making their users angry or self-conscious." So, in the face of new entrants the push is for further radicalization? A shrinking but higher margin user base will further expose the Company to losses if those users also become disenchanted. 

Third, and to the regulatory point, what should we make of the Company targeting 12 and under demographics? The answer is simple, they are trying desperately to find a new demographic...this isn't a sign of strength or that the Company is exercising monopoly power, but that is struggling to justify its own largesse. 

https://www.nytimes.com/2021/10/04/technology/facebook-files.html