Reddit cofounder Alexis Ohanian wasn't shocked by Meta's 26% plunge, saying Facebook's ad model 'doesn't cut the mustard' any more
- Meta's one-day $230 billion wipeout in market value Thursday didn't shock Reddit cofounder Alexis Ohanian.
- The Facebook parent's ad model "just doesn't cut the mustard anymore," the venture capitalist told Bloomberg.
Reddit cofounder Alexis Ohanian wasn't surprised by Meta's record one-day 26% plunge, because Facebook's digital advertising model is no longer attractive to ad buyers after Apple's privacy changes, he said.
Ohanian, who runs venture capital firm Seven Seven Six, suggested the social-networking giant's advertising business model might be somewhat obsolete.
"All of the savviest marketers in the Seven Seven Six portfolio have been moving their dollars away from Facebook and diversifying to other ad products, because the Facebook ad product — thanks to the Apple iOS changes — just doesn't cut the mustard anymore," he told Bloomberg in an interview Thursday.
Apple rolled out an iPhone privacy update in May that forces apps to get permission from users before tracking their activity for advertising purposes. The change has hurt ad-reliant platforms such as Meta-owned Facebook.
Meta's poor fourth-quarter results wiped $230 billion off its market value Thursday, after the company warned Apple's privacy changes could cost the company $10 billion in lost sales this year.
That's higher than the expected financial hit Apple's moves had on Facebook, Snap, and Twitter combined in 2021.
The primary source of Meta's revenue is its ads business, which draws from vast amounts of consumer data harvested from running three of the world's largest social platforms: Facebook, Instagram, and WhatsApp.
Its fourth-quarter ad revenue jumped 20% year-on-year to $32.6 billion, which helped Facebook make over $100 billion in annual revenue for the first time, Meta COO Sheryl Sandberg said in an earnings call.
But Ohanian believes Facebook isn't tracking data for ads in a way that makes sense, so smart marketers are shifting money away to other platforms.
"It also calls into question a revenue model like advertising, that never really felt great to most of the actual users and the people who are actually creating the content," he said.
Ohanian, whose VC firm recently raised $500 million to invest in crypto startups, said this relationship between the creator community and capital is what the idea of Web3 aims to solve.
"We're gonna see new business models that are created where the actual creators of the content — whether it's someone taking a selfie, or someone coming up with a clever post, or what have you — have a stake in it," he said.
"Having their attention is more properly valued."
"And I think that's going to be a very big story over these next years. What we'll find is that we weren't properly valuing attention. We weren't properly valuing community, because the only crude tool we had was advertising. And that really doesn't do it justice."
Meta's shares were last up 0.4% at $238.76 a share, recovering Thursday's losses as part of a wider tech rally.