Daily Brief: Meta Buys Brick And Mortar To Sell The Metaverse

Daily Brief: Meta Buys Brick And Mortar To Sell The Metaverse

almost 2 years ago3 mins

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Meta reported a mixed set of quarterly results late on Wednesday, even as the tech giant tries to bring new meaning to the phrase “online shopping”.

What does this mean?

Meta’s last earnings update was a disaster: the company’s stock price collapsed 25% after Facebook posted a drop-off in active users, triggering the biggest one-day valuation drop in US history. But the scrappy underdog has picked itself back up again, posting 6% more monthly active users across all its platforms than the same time last year. Its Reality Labs segment – which specializes in VR and the metaverse – performed well too, with revenue up 30%. And sure, Meta’s ad revenue missed expectations, probably partly because it decided to focus on formats like Reels – a short-form video that tends to earn less ad revenue than Feed and Stories. Still, more users is more ad revenue up for grabs, and Meta’s shares initially jumped 19%.

Meta stock
Source: Google Finance

Why should I care?

The bigger picture: Your body is holding you back.

There’s a lot resting on the success of the metaverse for Meta, but the company has some work to do on that front: its metaverse brand Horizon Worlds only has 300,000 users to Facebook’s 3 billion-odd. So to get the word out, the company announced this week that it’ll be opening its first-ever retail store in California next month. It’ll use the store to showcase its virtual reality headsets and other hardware, in hopes of convincing you to abandon your feeble corporeal form once and for all.

Daily active users

Zooming out: Snap vs. TikTok.

Meta’s not the only one with advertising problems: Snap reported worse-than-expected results last week, as rising inflation took its toll on companies’ marketing budgets. That’s the last thing it needed after Apple rolled out new privacy settings that have made it harder for companies to target their campaigns to the right prospects. Throw in stiff competition from Gen Z-favorite TikTok, and its outlook for this quarter missed expectations too.

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Deutsche Bank Reported Its Highest Profit In A Long Time

Deutsche Bank image

Deutsche Bank reported its highest quarterly profit in nearly a decade on Wednesday, but Germany’s biggest bank can’t relax just yet…

What does this mean?

There’s been a flurry of dealmaking in the last couple of years, but the threat of higher interest rates – which drives up the cost of borrowing – has helped bring that to a halt. That’s less than ideal for Deutsche Bank, whose revenue in its deal advisory segment fell 28% last quarter compared to the same time last year. Still, it made up for the shortfall elsewhere: its fixed income and currency trading business grew revenue by 15%, as traders took advantage of the recent market volatility. Its interest income from both corporate and private clients rose too, which – along with some savvy cost-cutting – helped bring up its overall profit by a better-than-expected 18%.

Deutsche Bank results

Why should I care?

For markets: Profit beats caution.

Deutsche did warn that the Ukrainian war – which is pushing global prices even higher – posed a real risk to its growth going forward, as did a weakening global economy. That might be why the bank put aside $320 billion last quarter in case customers can’t pay back their debts. That’s three times more than it tucked away in the first quarter of 2021, and it warned it’ll add “significantly” to that stockpile throughout the year. Investors, though, seemed to favor short-term profit over long-term caution, and they sent its stock down 6% on the news.

Zooming out: Two can play at that game.

No wonder Deutsche Bank is such a Debbie Downer: the bank warned this month that Germany – its biggest market – would fall into recession if there was a meaningful disruption to Russian gas supplies. And there could well be, given that it’s been pushing back against Russia’s demands to pay for its gas in rubles. After all, that principled move just backfired on Poland and Bulgaria: Russia’s cut them off, sending European gas prices up 20%.

Russian gas
Source: Bloomberg
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