If there’s one thing future-focused investors can take away from Facebook’s recent name change to Meta, it’s that one of the largest tech companies in the world is betting high on virtual reality. Should South African investors be betting on it too?
At the end of last month, Facebook Inc. (the parent company of the Facebook social network that many of us use) surprised the world by announcing its name change to Meta Platforms Inc. (‘Meta’). Its CEO, Mark Zuckerberg, explained that, from a branding perspective, the company’s former name was too linked to only one of its products (the company also owns Instagram, WhatsApp, Messenger and Oculus, in addition to Facebook) and to an old company vision. The new name also drew attention to their attempts to develop a ‘metaverse’ or a virtual reality version of the internet. Despite the parent company’s name change, all the company’s existing brands, including WhatsApp and Instagram, will remain in place.
In the 1980s, when I was growing up, there was a very successful musician called Prince Rogers Nelson or Prince. In the process of an acrimonious separation from his record company, he changed his stage name from Prince to an unpronounceable symbol. He then became known as TAFKAP The Artist Formerly Known as Prince, or even just The Artist. His fans referred to the unpronounceable symbol that was his name as the Love Symbol. This was not a happy time in his life, and, once the contractual dispute was resolved, he changed it back to Prince. Changing name can clearly be a sign that all is not well.
But what does this parent company name change from Facebook to Meta really mean? Is it important – particularly from an investment perspective?
The investment space has been fascinated by tech, trends, and the future for the longest of times. Getting ‘in’ on a technology before it becomes mainstream has made many people extremely wealthy, and spotting a trend before it becomes entrenched can also benefit your investment portfolio – provided you’re right about the trend’s potential. In short, every investor the world over would love to be able to see into the future, to see where the markets go, and minimise the risks associated with investing.
At Momentum Investments, we’re actively considering the best way to access world-changing, long-term trends. These trends would obviously include technology – the driver of the 21st century. Tracking the evolution of trends in this space, and the winners and losers, are of great importance to us if we’re to build an investment vehicle that is future-fit and forward-looking.
Facebook’s name change, while on the face of it relatively mundane, signals some key developments in the tech space that may be of interest to investors.
When the going gets tough – change your name?
The first trend that we at Momentum Investments think is important is that this name change comes at a time where the Facebook organisation and its entire business model is under severe regulatory and political scrutiny overseas. Growing concerns regarding the improper use of user data following the Cambridge Analytica debacle just after the 2016 US elections, have led to stringent privacy laws being implemented in the European Union in 2018.
More recently, whistleblower accounts outlining that the company knew that their social media platforms drove negative social outcomes, came to light. Such stories included Facebook being aware of the spread of misinformation leading to political polarisation, as well as the propagation of conspiracy theories, cyber-bullying and human rights abuses globally. More importantly, whistleblowers allege, Facebook did not do everything they could to avoid it, all the while assuring policymakers and investors they were actively working to combat this. Apparently, acting against these egregious behaviours would reduce engagement on the platform, which led to Facebook being accused of putting profits before society.
In this negative context, and with this much baggage attached to the brand, changing the company’s name makes sense – but it is unlikely to divert the attentions of regulators and investors. The heightened risk of future regulatory constraints on Facebook’s (now Meta’s) business model has put negative pressure on their share price, and raises questions as to the nature of their business model going forward. This is clearly of interest to us and our investors, as we consider whether to invest in Facebook/Meta and similar companies.
Virtual reality a possible investment reality for future-forward investors
The second trend that’s being more openly discussed since the name change is the concept of a virtual reality-based internet experience. If Meta can actually make this work effectively, it offers incredible opportunities for the ways in which businesses and society operate. The remote working model has been stringently tested during the Covid-19 pandemic, and found to be effective in the main.
The potential of an enhanced version of this, where people can effectively (and more realistically) ‘be’ in a meeting anywhere in the world, is incredibly exciting to those of us who like to look at future trends. Further, the opportunities this offers to virtually ‘travel’ also points towards environmental benefits, in terms of lower carbon emissions by less physical travel. These are only two of the most obvious ways in which such a technology can change the way our society interacts. The company that can make this happen – whether Meta or another company – will be incredibly valuable in the future. This is exactly the sort of trend any investment manager would want our clients exposed to.
While TAFKAP eventually returned to being called Prince, it is pretty certain that Meta will remain Meta for the foreseeable future. The world is evolving, and Meta is keen to be part of the future. It will indeed have to properly ‘go Meta’, though, if it is going to be able to continue to protect (or even enhance) its dominant position.
ENDS
