At the Facebook Connect augmented and virtual reality conference on Thursday Facebook chief Mark Zuckerberg announced a name change for the parent company - the hope is that the new name of Meta will represent a future beyond the now-troubled social media network.

The announcement comes as Facebook attempts to pivot to its ambitions of creating a  "metaverse" - a virtual reality version of the internet that the tech giant views as the future of the web.

However, many are critical of the timing of the announcement and view it as a strategic move to divert attention.

Facebook is currently embroiled in its worst ever scandal after former employee Frances Haugen leaked a slew of internal studies highlighting that executives knew of their sites' potential for harm - in particular to minors - prompting a renewed US push for regulation.

Matthew Kanterman,
Bloomberg Intelligence

Matthew Kanterman, Senior Equity Research Analyst of Technology at Bloomberg Intelligence told AsianInvestor that he does not believe Facebook’s rebranding to Meta is a reaction to the scandal.

“Changing your brand, changing your company name is not something that companies take lightly. It's not something they do with a snap of a finger,” he said.

Kanterman said the Meta rebrand “has been a long time coming,” and is likely to move investors' focus towards the metaverse vertical that it's trying to build, starting with Oculus and its VR content.

Facebook has been investing and scaling internally on its metaverse project, and has roughly 10,000 people now working on Oculus and associated businesses.

“Historically, Facebook has had several scandals, there was Cambridge Analytica and other associated privacy issues. Changing the brand as they shift their strategy and commit to the metaverse make sense, from a high level,” said Kanterman.

“It does provide a good opportunity for them to try and change perception of the company overall, but it just so happens it's coinciding with what's going on right now.”

FACEBOOK STOCK FALLING SINCE SEPTEMBER

Facebook’s stock price has been diving since the Wall Street Journal published the first reports from whistleblower Frances Haugen on September 13.

As of Friday, Facebook’s shares have fallen by nearly 16%. Even though Facebook’s third-quarter report indicates its valuation is still near an all-time peak since going public in 2012, it has dipped below the $1 trillion mark that it surpassed earlier this year. By contrast the tech-heavy Nasdaq 100 Index has been on the rise after hitting a three-month low on October 4, rising 8% since.

Nasdaq 100 Index
Source: Bloomberg

Kanterman argues that the revelations from Haugen only tell part of the story, but even so it has not helped the fortunes of Facebook. 

“Whenever there's uncertainty about the future growth of the company, that causes pause with investors, and they tend to sell first and ask questions later,” he said.

“You also have to consider the core business of Facebook is actually online digital advertising. Last week before Facebook reported its earnings, smaller internet companies Snap and Pinterest both showed in their earnings reports a significantly larger-than-expected impact from Apple's privacy changes to their advertising business.

“That caused a lot of fear, not just in Facebook, but in a lot of other digital platforms like Twitter. And you saw the stocks all go down in tandem around the growth of their advertising revenue.”

WILL REBRAND SAVE STOCK?

A portfolio manager at a Singapore family office told AsianInvestor he does not see the rebranding having much impact on Facebook’s share price in the near term.

“Unless they announce some big investments in that space such as acquisitions or an upsizing in its VC arm,” the portfolio manager said.

While the short-term price may not be impacted, overall the recent controversy is being viewed as more of a speed bump in Facebook’s growth trajectory.

“They'll work through it. Tech CEOs can be extremely flexible and innovative when they need to be,” the manager said. “Everyone assumed Tesla was dead in the water for as long as Musk was CEO and carrying on with his shenanigans, but now it's a trillion-dollar company and Musk is the richest person in the world.”

Facebook’s earnings call on Monday showed strong growth one month on from the scandal breaking. Kanterman reiterated that it’s important to remember that “this is a company that has come through lots of scandals in the past, they're still growing tremendously fast”.

“In the last quarter, on a year-on-year basis, Facebook added more revenue than Twitter's entire annual revenue. They're growing tremendously off of a huge revenue base. Clearly advertisers see Facebook as a necessary channel to connect with their consumers, not just on the Facebook blue app, but on Instagram and WhatsApp,” said Kanterman.

“So if you put it into that perspective, you could construe this as a bump in the road.”

Additional reporting by Natalie Koh.