Facebook’s Second Quest

Will the Metaverse work? Unclear. But something needs to. Eventually…

M.G. Siegler
500ish
Published in
6 min readNov 1, 2021

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With the — forgive me — meta conversation now out of the way about Facebook’s name change, let’s zoom out to look at the why. Beyond the poisoned brand, the mobile platform risk, and the slipping credibility amongst the youths, why shake up a company which has been so handsomely rewarded by Wall Street at arguably peak power?

Nearly all truly great businesses that endure over a long period of time need a second act. There are a handful of companies like Coca-Cola (medicinal and/or cocaine history aside) or the oil companies (monopolistic breakups aside), which are still largely doing the same thing that they originally set out to do. But even just looking at the list of largest companies by market cap, they are all either newer tech companies or a holding company, Berkshire Hathaway (where their largest equity holding, and a significant amount of their value, happens to be a massive tech company, Apple).¹

The oldest tech company on the list is Microsoft, at 46 years old. As it happens, the company has just incredibly vaulted back to the number one overall position, with a value just under $2.5T, just ahead of Apple. And the reason why Microsoft is number one (and why Apple has long been number one in recent years) is simple: reinvention.

Microsoft, of course, does a lot of things these days. But at the core of the business, they were able to transform from a software licensing company to a cloud services company. There was a decade or so there where it wasn’t clear if Microsoft would be able to evolve — least of which because they were milking more profit than ever out of said software.² But as the Satya Nadella era has made clear (certainly with regard to the stock price), the company needed to think differently about what they actually are.³

Apple, which is almost exactly one year younger than Microsoft, has also had to reinvent themselves a handful of times over the past few decades. But unlike Microsoft, they were absolutely forced to at one point at the hands of near-death. While the iMac was about refocusing, the iPod was a reinvention, and paved a direct path to the iPhone. But even today, the company is also in the midst of a reinvention to be more services-oriented. I — and many others — worry this is less a reinvention and more a way to milk profits. Not exactly the Steve Ballmer-era of Microsoft but not exactly not that either. We’ll see. The products are still, for the most part, great. And there’s a world where the services tie all the current and future — Apple Glasses, iCar, etc — products together in a cohesive narrative. But there’s also this nonsense. It needs to change. And will one way or another.

Then there’s the OG tech company, IBM, founded 110 years ago. They’re still alive but whereas once (50+ years ago) they were the most valuable company in the world by far, now their market cap matches their age — they’ve long since been surpassed by not only the tech companies listed above, but by companies like Airbnb, Shopify, and Square, which were each founded just over 10 years ago. IBM is perhaps the ultimate example of reinvention over all that time, with multiple different eras and innovation, which is how they’re still alive. Unfortunately, in recent years, they’ve seemingly spent more on marketing things like Watson than on creating value from the technology. It’s probably time for a forth or fifth act…

I could go on. But the point is that even the first generation of technology companies have already had to reinvent themselves to remain relevant and on top of the world.⁴ Interestingly, nearly all of the “second wave” of tech companies failed to do so and are now no longer with us, or have merged — think: AOL, Yahoo, etc. Depending on which cohort you place them in, perhaps only Amazon emerged from this.⁵ And while they’re still clearly first and foremost an online retailer, they’ve obviously undergone some massive reinvention over time, culminating in the AWS business.

We’re now at the point where the third wave of tech companies are going to start to have to figure out what’s next in order to stay relevant. To be clear, many of them have been working on such initiatives for a while now. But this Facebook-to-Meta maneuver feels like one of those first true existential moments of change for this cohort.

Facebook undoubtedly would have thought that they were already working on their second act, and perhaps even pulled it off. Certainly, you could argue that moving the business from desktop to mobile was a pivotal move which the company bungled at first and it nearly cost them dearly. And, of course, the acquisitions of Instagram and WhatsApp were key moments as well. But all of that was about keeping the original core of the company, social networking, vital and thriving. And it worked. But the problem is that it worked so well that Facebook now finds themselves in the multitude of predicaments they’re in today. And thus, the need for the second act.

At first, Mark Zuckerberg clearly thought he could do more of a micro-pivot as it were, and keep social networking as the core of Facebook by moving towards more private networks and sharing. The work is still underway on many of these initiatives, but it’s clearly not going to be enough to foster the real change that the company needs.

Enter Oculus.

You have to give Facebook credit here. In the nearly eight years since Facebook acquired the VR company, they have not only not pulled back from the technology despite it basically not moving the bottom line for the company at all, they’ve doubled and then tripled down, pouring billions of dollars of resources into the field. And that has been even more important because nearly everyone else has retreated from the VR space when it became clear that the timing once again wasn’t quite right for VR to work on a number of fronts. Facebook has basically said, ‘screw that, we’re going to will this space from virtual to reality’.

And now they’re tripling, quadrupling, and so on, down here. This isn’t just betting the company on the space, this now is the company.⁶

It’s hard to think of another such change with this level of in-your-face boldness.⁷ This isn’t a “New Coke” slight flavor tweak — which, of course, bombed and had to be rolled back — this is a “we’re not this company anymore” move. Of course, that is easier to do when the old company and product continue to exist and print money to enable the new moves, but it’s still a bold branding gamble, if nothing else.

It’s needed for all the reasons already discussed. But there is still some level of kudos to Facebook/Meta warranted for doing so from a position of business strength, even if it’s in a time of brand weakness.

Yet part of me does worry that this ends up being a bit of a head fake. Not so much that the vision outlined by Zuckerberg is pure vaporware, just that the timing still may not be right for a long, long time. And so Meta remains Facebook in everything but name for a long, long time. I’m reminded a bit of self-driving cars. They’re right around the corner — a decade running.

Speaking of cars, the automobile companies are perhaps another sector where the behemoths have mostly stayed in power while doing largely the same thing. Of course, none of them are Tesla, even combined. So…

¹ This list leaves out the oil company Saudi Aramco due to its complicated national ownership and thus, valuation structure. It’s limited stock is currently valued just over $2T, behind Apple and just ahead of Alphabet.

² To Steve Ballmer’s credit, he did lay the groundwork for the new Microsoft in the form of Azure. He just got… um, distracted, by other shiny objects. One of which, by the way, was investing in Facebook! One of the all-time great investments — if only they had held longer…

³ Speaking of distractions, we won’t go into the embarrassing TikTok path that Nadella tried to and nearly did lead Microsoft down… Envy, you say?

⁴ I would put Adobe in this first wave as well, having been founded in 1982, and has certainly have an amazing resurgence after a move to the cloud in the past several years (current market cap: $300B).

⁵ I would probably say the “second wave” started with AOL which was born in 1985. And the “third wave” started with Google, founded in 1998.

⁶ Certainly there will be more to the company even under the Meta moniker, than just VR — Novi, their crypto play, also seems like a prescient move, albeit one also screwed by the Facebook brand!

⁷ Maybe, of course, the oft-compared big tobacco?

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Writer turned investor turned investor who writes. General Partner at GV. I blog to think.