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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Companies that do just one thing are surprisingly rare, especially in Silicon Valley, where ambition and radical self-belief are the norm. But some take multitasking to a new level.
Take Meta Platforms. Its shares fell 9 per cent on Thursday, after second-quarter earnings missed expectations. What spooked the market wasn’t that, though: ignore a couple of one-off charges and operating profit would have matched the $22bn forecasts. More unsettling is that chief executive Mark Zuckerberg is firing in multiple directions with little, so far, to show for it.
At present, 98 per cent of the company’s revenue comes from selling ads on its social networks, mainly Facebook and Instagram. That’s no bad thing, because those are performing very well. Meta served up 14 per cent more ads this quarter than a year ago, and charged 12 per cent more for them, on average. Instagram users spent more than 10 per cent longer doom scrolling.
But Meta is also working on a plethora of other products further from its comfort zone, including coding agents, task-executing assistants, data centre rental and customer service bots. Details on revenue and timing for much of this innovation are scant. In the company’s earnings call on Wednesday, Zuckerberg said various exciting things would happen “soon” no fewer than 10 times.
Investors in tech are used to “side quests”. Think of moonshots such as Alphabet’s forays into Waymo’s driverless cars, protein folding and quantum computing, or Amazon’s satellite network. Sometimes they become huge, as in Amazon and Microsoft’s cloud computing divisions. If they fail to launch, investors usually aren’t much worse off.
Meta’s side hustles come with higher stakes. Zuckerberg needs them to work out in order to justify his enormous spending plans. The company may invest nearly $750bn over the next five years, analysts polled by LSEG reckon, in the pursuit of AI “superintelligence”. That prize could be worth trillions if he succeeds, and very little if he doesn’t. Without nearer-term returns along the way, capital will get harder to come by.
He’s not the only one for whom fringe projects come with high expectations. Elon Musk’s SpaceX is snaking out in multiple directions too, to fund his long-term hope of colonising Mars. The difference is that Musk has done multiple things rather well, from making cars to launching rockets. Zuckerberg’s extracurricular record — think of the failed Metaverse — is less persuasive.
It’s not that Meta won’t succeed in producing solid returns outside of its huge ad-selling business. But it’s unsurprising that investors want more proof. The company’s shares trade at 17 times forward earnings, according to LSEG, their lowest multiple in three years and behind the rest of the Magnificent 7. Zuckerberg wants to be a jack of many trades. For now his company remains a master of one.
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