This analysis was first published in SvD Näringsliv, in Swedish, on December 28th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
A hiring freeze, a collapsing share price and billion-dollar fines from regulators. Despite a brutal 2022, almost everything points to 2023 being Zuckerberg’s biggest challenge yet.
He can be quite stiff, Mark Zuckerberg. But suddenly a different person appears. One who laughs. Even at jokes made at his own expense.
“It’s hard to imagine anything more important,” says Mark Zuckerberg.
It is November 2021, and Facebook’s founder and CEO has just been asked by YouTuber Sara Dietschy to rate various memes about the company’s impending name change to Meta. Meta has recently held a major presentation in which Zuckerberg himself laid out a vision for the next ten years. In the weeks that followed, he went on a PR tour to talk about it — including the meme review.
Since then, Meta’s share price has fallen to around $120 — a steep decline from those lighthearted days. The tech world has gone through a severe correction.
And yet there is much to suggest that Meta faces even bigger challenges ahead. In fact, 2023 may come to be Zuckerberg’s “annus horribilis” — a terrible year, as the late Queen Elizabeth II once described it.
The first concern is that Meta’s business model is under attack.
After a decade of enormous growth, 2022 brought a revenue decline for the first time in the company’s history — two quarters in a row. That is a bad indicator for the year ahead. There are primarily three things weighing on Meta’s ad-based revenues.
The general economic climate tends to hit the ad market hard. Rapidly rising interest rates, inflation and a looming recession in several key markets have prompted advertisers to pull back.
The second factor is TikTok. The platform — which is Chinese-owned and has attracted concern from officials including FBI Director Christopher Wray, who called it “extremely worrying” — has nonetheless failed to alarm users. TikTok’s ad revenue reportedly grew 142 percent year over year.
Third, Meta lost the ability to precisely track its advertising on Apple iPhones. This seemingly small change to Apple’s operating system could cost Meta around 103 billion kronor in lost revenue, according to Zuckerberg himself. Apple claims the change protects user privacy — though it also conveniently coincided with the expansion of Apple’s own advertising business. Unusually good timing for Tim Cook. Very bad timing for Mark Zuckerberg.
The second major cloud over Meta is that tech regulation is starting to bite. In 2023, the EU’s Digital Markets Act (DMA) comes into force, with the Digital Services Act (DSA) following the year after. Lawmakers have taken their time — to put it mildly — in addressing these issues. But when things finally start to move, they tend to move hard. The DMA is almost tailor-made to squeeze the largest tech companies, and Meta is firmly on that list.
A separate EU proposal would strip Meta of the ability to require users to see personalised advertising. That would further reduce the precision of Meta’s ads on both Facebook and Instagram, with likely severe consequences for revenue. The proposal will almost certainly be challenged in court.
Even without new laws, it can get expensive. Under GDPR, Meta has already been fined a total of 9.5 billion kronor since last year.
One advantage Meta has on the regulatory front is its sheer scale. The FTC, led by Lina Khan — who has become well known and feared in tech circles — recently sued Microsoft to block its acquisition of Activision Blizzard, a deal worth 710 billion kronor. But Khan’s FTC doesn’t only target the largest deals: they also sued Meta in an attempt to block the acquisition of Within, a relatively small VR developer.
That blocked acquisition is a serious warning sign. It signals that Meta’s previous strategy of buying its way to new innovation is unlikely to work in 2023. Instagram, WhatsApp and Oculus were all companies Zuckerberg purchased — for enormous sums. If that route is now closed off, he has to build the next generation of products himself.
Which explains why Zuckerberg is committing $100 billion to the metaverse. He doesn’t really have another option.
But the question remains: does he genuinely see something others don’t — or are there simply no people around him willing to disagree?
His former operational partner, COO Sheryl Sandberg, left Meta in autumn 2021. She was widely described as the adult in the room during Facebook’s most chaotic years of growth. Zuckerberg also controls Meta outright through a special class of shares that gives him effective veto over the company’s direction. In practice, he cannot be fired.
In that situation, it is easy to end up surrounded by yes-people. Why challenge the vision of the all-powerful CEO? It is easier to keep your head down and hope he is right — even if not everyone believes he is. There is an element of unchecked authority here that is hard to ignore. And that is rarely a good starting point for innovation.
Do you remember Facebook Slingshot, Lasso and Rooms? No, you probably don’t. They were three in a long line of failed internal projects that never amounted to anything. That is the trend Zuckerberg must now break.
Not everything is bleak, however. Two things do work in Meta’s favour.
First, the stock is now genuinely cheap by tech standards — the whole company is valued at little more than 2.5 times revenue. Google and Apple trade at roughly twice that. That could attract new investors and contribute to upward momentum.
Second: inertia. In the third quarter, Meta had almost three billion monthly active users — roughly a third of the world’s population. It is easy to keep using Messenger, Instagram and WhatsApp once you’ve started. They may not feel quite as fresh as they once did, but will people actually leave? Meta’s numbers suggest most won’t. That gives the company a solid base from which to build new revenue streams.
In the end, Mark Zuckerberg himself — as the company’s largest shareholder — has billions of personal reasons to keep trying. Whether he succeeds remains to be seen. But 2023 could be a very long year for him.
