Meta decides to go into debt and launches a $10 billion bond issue.

Is the meta over? The company, especially known for its social networks Facebook and Instagram, is looking for fresh money. To do this, Meta will issue bonds, according to a document filed on Thursday, August 4, 2022, with the SEC, the policeman of the US stock market. Meta plans to raise $10 billion in its first-ever bond issue, Bloomberg reported. Other tech giants such as Apple and Intel also issued bonds this week, raising $5.5 billion and $6 billion, respectively.

Share buybacks and investments

The Meta bond issue consists of four tranches with a maximum term of 40 years. Meta appears to be looking for buyback and investment funds to upgrade its business.

If Meta is one of the few companies in the S&P 500 that does not have debt on its balance sheet, then in the second quarter of this year, the company’s turnover decreased by 1%. For the first time since the IPO in 2007. The social network has revealed a decline in the online advertising market: in general, this sector continues to grow, but at a slower pace than in 2021. First of all, Meta is losing social media advertising market share to TikTok’s advantage. Trends that are reflected in the average cost of ads delivered by Meta, which fell 14% this quarter.

tiktok contest

In the background, TikTok seems to have first and foremost established itself as a perennial competitor for Meta, which fears young people are leaving Facebook and Instagram for a video-sharing app. Behind the possible loss of daily users is the loss of advertising market share in favor of a competitor.

In the US, influencer marketing spending is expected to increase more than 12% this year to surpass the $4 billion mark, according to Insider Intelligence. By the end of 2023, spending on influencer partnerships will almost double compared to 2019. Nearly 91% of US influencer marketing brands will invest more in video this year, proving the format is gaining momentum. However, if Instagram remains the most influential platform overall this year, TikTok is expected to overtake Instagram Reels in 2022.

Reels is a short video format modeled after TikTok. Meta insists on widespread use of this format. At the same time, the company promotes content posted by accounts that the user does not follow. The goal is to more than double the percentage of such content in feeds by 2023. Currently, about 15% of the content in a user’s Facebook feed and a little more on Instagram is spurred on by its recommendation algorithm. Algorithm that requires investment.

Dear Metaverse

Finally, the Meta has shown great ambition in the metaverse. This major project, unveiled by Mark Zuckerberg last October, requires a lot of investment before it sees the light of day. Meta has been making a name for itself in the VR world for several years now with its Oculus headsets. But during the presentation of his metaverse project, Mark Zuckerberg seemed to want to go much further to create an immersive world in which to communicate, work and shop. The Facebook founder sees virtual reality as the next computer revolution after the smartphone.

Before achieving such a result, the Meta spends substantial amounts. However, the group is at risk of curbing its virtual and augmented reality spending, which was $3 billion in the first quarter of 2022, due to falling ad revenue. This $10 billion loan is part of that trajectory. . This would give Meta more financial room to scale up its costly initiatives as cash flow shrinks.

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