Social media was abuzz on Wednesday after The Verge broke a story that Facebook was planning to change its name as part of a rebranding strategy.
Technically, it wouldn’t be the first time that the company changed its name, since it originally started as “The Facebook”. But, there are implications here beyond just dropping an unnecessary article in front of a proper noun.
Little is known about the branding change beyond what The Verge reported, and Facebook steadfastly refuses to comment on it.
Speculation has been rampant throughout the media, with some suggesting it’s about Zuckerberg trying to get away from the latest bad press.
The initial reporting suggested it had more to do with the company’s move towards being instrumental in driving the so-called “metaverse”. That speculation is fun and all, but what does it mean for the stock price?
What’s really going on
The markets were little impressed by the disclosure.
Facebook shares had moved up just over $324/shr at the start of the week to just under $340/shr before the article from The Verge came out. Since then, trading has been flat and there is little to trade on.
The reality is that Facebook is unlikely to rebrand its flagship product – the social media site. Rather, it’s likely to be a rebranding of its holding company.
Facebook inc owns a series of other ancillary properties, including Instagram, WhatsApp, and the major driver behind the change, Oculus VR. This could be similar to how “google” rebranded to Alphabet as the parent company, but the search engine remained the same.
If the Facebook social media platform isn’t going to change its name, it rather suggests that the move has little to do with the image issues that the platform has been facing recently.
Towards a new horizon
Zuckerberg has been a long proponent of the “metaverse”. The idea behind this is that people can connect across platforms with a single account, and layer on top of real-world experiences with Augmented Reality.
So, basically, a more sophisticated version of Google Glass (what happened to that, by the way?). The concept was illustrated in the movie Ready Player One.
Recently, Facebook announced they were hiring as many as 10k new people to flesh out the metaverse. Currently, these applications are in trial phases, but are under the umbrella name of “Horizon”.
Horizon Workplace, for example, competes with Zoom and other virtual meeting apps. That’s where the speculation that the parent company could be renamed “Horizon” stems from.
Aesthetics or a foundational change?
At the bottom of the issue is the question of the future of the company.
Facebook is no longer the up-and-coming platform, and with over 2,4 billion users, it might have reached its capacity. Pushing towards the metaverse might be an exciting opportunity, with a lot of potential for new revenue.
Nonetheless, it also has substantial risks, since it’s still a relatively unknown concept. And it has never been done before.
Zuckerberg will discuss the new name at the company’s annual Connect meeting but might announce the new name sooner. The name is likely to not bother investors, but it could mark an inflection point for Facebook.
How much capital will Zuckerberg throw behind this new direction for the business? And when can investors see a bump up in EPS?
These will likely be the defining factors for whether the market responds positively or not to the name change.
Friday, 22 Oct, 2021 / 2:12
