August 9, 2022

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5 Lessons Any Entrepreneur Should Learn From Facebook’s Recent Stock Crash

In early February, the stock for Meta, previously known as Facebook, plummeted by a whopping 26 percent in one day, which translated into a $230 billion reduction in its market cap. Mark Zuckerberg himself lost almost $29 billion of his personal wealth due to the crash. It signified the stock’s biggest one-day drop.

A loss this significant begs the question: What lessons can you learn from this catastrophic event? Here are a few takeaways that any entrepreneur should pay attention to.

1. Don’t get so comfortable with success. 

Facebook is a massive social media platform. So what happened that made the stock plummet? The platform’s daily users went from 1.93 billion daily active users to 1.929 billion. While to you and me that might seem like a tiny insignificant drop in daily active users, it’s not about the numbers. Rather, it’s the fact that for the first time in its history, Facebook’s user-base declined. 

Entrepreneurs at the top of their game might feel the urge to go sit on a beach somewhere with a margarita in hand. After all, they’ve accomplished all they set out to accomplish. But this Facebook crash teaches us that success is temporary unless you keep building and keep shipping. 

Or as someone recently told me, whatever happens to you in life, whether it’s a positive thing or a negative thing, always remember, “this, too, shall pass.”  

2. Do not put all your eggs in one basket. 

The day Zuckerberg announced that he’s changing the name of the mother company that owns Facebook, Instagram, WhatsApp, and Oculus to Meta, I had a very uneasy feeling in my stomach. This was not a small bet. The way I saw it, Zuckerberg put all his billions of eggs in one basket called the Metaverse. 

Now don’t get me wrong, the world is most definitely moving in the direction of the Metaverse, but perhaps it would have been a better idea if Zuckerberg had hedged his bet just in case this whole Meta thing doesn’t work out. 

3. Never underestimate the underdog. 

This is an incredibly important lesson that people just can’t seem to learn. It’s hard to forget that time Steve Balmer mocked the iPhone upon its release, saying that Apple can’t do phones and no one will buy the phone. Or that there were other market leaders for search engines when Google launched, with few thinking it could ever dominate the market the way it has. 

Well today, I’d say that the underestimated underdog is TikTok. And even though Zuckerberg tried to buy them, I’m pretty sure he, or anyone else for that matter, never imagined that TikTok would eat Facebook’s breakfast the way it has. 

While Facebook was growing so fast, the company and its leaders might have missed how quickly TikTok is growing and dismissed them as a real threat. Well, it seems they learned the hard way how much people love TikTok. 

4. Trust is your most important asset. 

Here’s the thing with Facebook–people don’t trust it and I’m not sure you can blame them.

Whether it was the crisis with Cambridge Analytica, the update to the company’s privacy policy that had people scared that their private messages are being read by Facebook, or countless other examples, people really don’t trust that Facebook is doing things in the best interest of its users. 

It turns out that trust is an important asset in business, and exponentially more important when you just built your whole business around the Metaverse, which basically requires users to trust you enough to live in an environment you created. 

5. Always be innovating. 

If you examine Facebook’s strategy over the years, it was pretty straightforward. Every time a competitor popped up, Facebook bought them. They did it with WhatsApp, they did it with Instagram, and they really wanted to do it with TikTok. When Facebook realized they couldn’t buy TikTok, they changed strategies and tried to copy them. 

Now, this is by no means a unique strategy. It seems like everyone is copying everyone nowadays. Snapchat, Instagram, Facebook, YouTube, LinkedIn, and others all seem to be copying ideas from each other–including stories, reels, and many other examples. 

The thing is, there comes a point that users want the original and not the ripoff. Facebook and Instagram have tried to copy TikTok but so far, that has not worked out too well. And while Facebook is on its way down, TikTok is blowing up in popularity. And the lesson? Well, you should always be innovating to the point where competitors want to copy you.

Overall, I think the reason the Facebook stock crashed the way it did is that investors are afraid that Facebook got too comfortable with its ownership of the market and is now headed to the graveyard to join MySpace, BlackBerry, Nokia, and countless other companies that were once market leaders. If you don’t want to join them, learn from the lessons described here.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

https://www.inc.com/hillel-fuld/5-lessons-any-entrepreneur-should-learn-from-facebooks-recent-stock-crash.html