Why Have Meta Shares Dropped?

If you scrolled through Instagram today, liked a photo on Facebook, or sent a message on WhatsApp, you used a Meta product. But while you were scrolling, the company behind those apps was having a historically bad day. Its stock price took a nosedive, leaving many people asking a simple question: why?

The answer lies in a story with three main parts: fierce competition, new advertising challenges, and the company’s huge, risky bet on the metaverse. These factors converged to make investors question the future of the company.

To understand a stock drop, think of a company as a giant pie. A single share of stock is one tiny slice. If you own a share, you own a piece of the company, and its price moves based on how valuable people think the entire pie will be in the future. When headlines report Facebook stock dropping, it means investors—the owners of those ‘pie slices’—are getting nervous. They worry the company won’t be as profitable tomorrow, so they rush to sell. With more sellers than buyers, the price per slice goes down.

What Does a Stock Price Really Tell Us?

A stock’s price is less about how a company is doing today and more a bet on its future. Imagine an auction where the final price is based on how much money everyone thinks the company will make next year. If that future looks shaky for a company like Meta, its share price can drop, even if billions of people are still using its apps right now.

This collective feeling is known as ‘investor confidence.’ It’s less a science and more the mood of a crowd. When investors are optimistic, they buy shares. But when something spooks them, that confidence can vanish. A single piece of bad news can trigger a wave of selling as people rush to offload their slice of the pie before it loses more value. This is why a stock can fall so dramatically in one day. One of the biggest clouds on Meta’s horizon has been the explosive growth of a competitor fighting for the one thing Meta needs to survive: your attention.

Is TikTok Eating Facebook’s Lunch?

Every minute you spend scrolling through TikTok is a minute you aren’t spending on Instagram or Facebook. For investors, this is a critical threat. Social media companies are locked in a fierce battle for a limited resource: your attention. In this ‘attention economy,’ the real product sold to advertisers isn’t just ad space—it’s your eyeballs and your time.

As TikTok’s popularity exploded, it began siphoning away the very thing Meta needs to make money. Think of attention as a raw material, like crude oil. If a rival starts taking control of the world’s oil supply, the value of your oil-dependent business is suddenly at risk. That’s how investors saw TikTok’s rise—as a direct raid on Meta’s most valuable asset.

For years, investors could count on Facebook’s user numbers always going up. This steady growth was proof of a bright future. But in early 2022, the unthinkable happened: Facebook reported a drop in its number of daily users for the first time in its history. The seemingly unstoppable growth engine had stalled, sending a shockwave of doubt through the financial world. A powerful rival stealing users was a major red flag, but another tech giant was about to make it harder for Meta to profit from the attention it still had.

Why Did Your iPhone Suddenly Cost Meta $10 Billion?

While TikTok was chipping away at user attention, a quiet software update from Apple delivered a devastating blow to Meta’s bank account. You’ve likely seen the pop-up on your iPhone asking if you want to allow an app like Facebook to “track your activity across other companies’ apps and websites.” With its App Tracking Transparency (ATT) feature, Apple gave users a simple choice for or against digital surveillance.

For Meta’s advertising business, this was a catastrophe. The company made its fortune by building detailed user profiles—tracking not just what you do on Facebook, but what you shop for on Amazon or what news you read. This data allowed it to sell hyper-targeted ads. When millions of iPhone users tapped “Ask App Not to Track,” it was like someone turned off the lights in Meta’s data-gathering factory.

Suddenly, Meta’s powerful advertising tools became less precise, and it was harder to prove to a small business that their Facebook ad led to a sale. For advertisers, this meant their marketing dollars weren’t going as far. The financial damage was staggering. Meta announced that Apple’s ATT privacy changes would slash its advertising revenue by roughly $10 billion in a single year. Faced with these two massive problems, Meta turned to a risky and fantastically expensive solution: building a whole new world.

The Billion-Dollar Bet: What Is the Metaverse Costing Meta?

Faced with a crisis in its main advertising business, Meta went all-in on an ambitious new direction: the metaverse. This wasn’t a side project; it was a full-blown pivot, costing billions and making investors nervous about the impact on META stock.

Imagine you own a profitable coffee shop. Instead of using that money to open another shop, you announce you’re spending every dime trying to invent a coffee bean that grows on the moon. It could make you a trillionaire, but for now, it’s just a huge, expensive hole in your budget.

This is essentially what Meta is doing. The division building the metaverse, Reality Labs, is a financial black hole. To put the Reality Labs financial losses in perspective:

• Core Business (Facebook, Instagram, WhatsApp): Makes tens of billions in profit.
• Future Bet (Reality Labs / Metaverse): Loses over $10 billion per year.

For an investor, this picture is alarming. They see a company taking guaranteed profits and pouring them into a futuristic dream that might be a decade away from paying off, if ever. This massive spending, combined with slowing growth and advertising headwinds, created a perfect storm that caused many to sell their shares.

Is It Just Meta, Or Is All of Big Tech in Trouble?

While Meta’s problems were significant, the company wasn’t navigating this storm alone. The entire tech industry was sailing into a massive economic headwind, with bigger forces shaking investor confidence across the board.

The most important factor was rising interest rates. When interest rates are near zero, a safe savings account earns next to nothing, so investors are more willing to risk money on growth-focused tech companies. But when interest rates go up, that same safe account offers a decent, guaranteed return. Why gamble on a long-shot future bet when you can get paid safely today? This makes investors pull money out of riskier stocks.

This shift away from risk hit the whole sector hard. In 2022, giants like Amazon, Google’s parent company Alphabet, and even Apple saw their stock prices fall significantly. Meta’s internal stumbles happened at the worst possible time, during a market that had lost its appetite for expensive, futuristic dreams.

What This All Means For You

A headline about Meta’s stock dropping can be confusing, but the reasons separate the health of the apps you use from investors’ bets on the company’s future. The stock’s fall was not caused by a single issue, but a convergence of fierce competition from TikTok, costly advertising challenges from Apple’s privacy features, and a hugely expensive pivot to the metaverse.

For you as a user, this drama on Wall Street doesn’t mean Instagram will disappear tomorrow. The apps are still immensely popular. The next time you see a headline asking ‘Will META stock ever recover?’, you’ll know the answer depends on whether Meta can convince investors it can overcome these specific challenges.

Ultimately, the stock’s performance isn’t about whether we’ll ‘like’ Meta’s products today; it’s about whether Wall Street believes the company’s massive bets will create more value tomorrow. That is the crucial difference.