Elon Musk and Mark Zuckerberg, two influential billionaires in charge of influential social media platforms, have a history of rivalry and public bickering. They have sparred over SpaceX’s rocket launch failure and risks of artificial intelligence in the past, even as Musk soared well past Zuckerberg to become the world’s richest man in 2021. Their rivalry intensified after Musk bought Twitter last year. Since then, however, it is Zuckerberg who has bested Musk by some key metrics.
In the past year, Zuckerberg’s net worth more than tripled to $109 billion, while Musk’s shrank by $9 billion to $195 billion, according to Bloomberg Billionaires Index. Their wealth is closely tied to their companies: Meta Platforms’ market capitalization has jumped from $252 billion in November 2022 to $801 billion now. In the same period, the market cap of electric vehicle maker Tesla, Musk’s main business, has shrunk from $719 billion to $654 billion. The valuation of SpaceX, a privately-held company owned by Musk, has shrunk by about 15% since July 2022.
The fall of Twitter, now renamed X, has been more drastic and visible. Its valuation, based on restricted stock units awarded to employees, has dropped from $44 billion to $19 billion. Musk has cut costs since he took over, reducing headcount from 7,500 to about 1,500. However, its revenues, which were about $4.2 billion in 2022, have been declining by 55% year-over-year each month since he took over, according to Reuters. Its subscription revenues, estimated at $150 million, can scarcely fill the gap.
Speed breakers
X is only one part of the story. Tesla’s drop in market cap partly reflects the disappointing numbers reported in the latest quarter. Its net profit was down 44% year-on-year. It sold fewer cars than in the previous quarter. As competition intensified, it had to cut vehicle prices by about 25% compared to the same period last year. The price cuts might continue as demand remains weak and macroeconomic risks persist.
Tesla enjoyed higher valuations than traditional car companies because it was seen as a technology firm. However, as its margins shrink, and the competition from traditional car companies such as Toyota, Nissan, GM and Ford intensifies, its premium is expected to shrink, too. They are increasing their investments in EVs and batteries. Last week, Toyota announced that it was investing $8 billion in its battery manufacturing plant in North Carolina. Besides, in China, a promising market for Tesla, local players such as BYD, Nio and Xpeng are eating into its market share.
Social network
Meta has also had its share of challenges. Its ad revenues were hit after Apple changed its privacy policy to give users greater control over their data in 2021. In July, Meta launched Threads, attracting users looking for a Twitter alternative. But the daily active user count of Threads has dropped from a high of 3.4 million to 1.1 million by mid-September, according to MarketWatch. In the UK, it is facing a copyright lawsuit from a British software firm called Threads.
However, as of October 2023, Meta still owned four of the world’s top 10 social media platforms by monthly average users, namely Facebook, WhatsApp, Instagram and Facebook Messenger, according to Kepios. It is building on this user base to launch more services. For example, in India, WhatsApp has been adding features to turn into a commerce platform. Musk has similar ambitions for X, seeing it as a super-app with finance at its core.
Mega pivot
However, the market rewards companies for performance, not ambition. Meta has reported year-on-year revenue growth in each of the past three quarters. In the latest quarter, its revenues were up 23%, while its net profit surged over 2.6 times, on the back of drastic cost-cutting measures. More importantly, Zuckerberg, who bet on the metaverse in 2021, quickly pivoted to AI, as OpenAI’s ChatGPT caught investors’ imagination.
In the past two months, Meta has launched AI-powered chatbots for users to improve engagement, and new AI tools for advertisers to improve creativity and productivity. These tools could alleviate the pain caused by Apple’s privacy policies. Meta could pivot fast as it has been building its AI infrastructure for some years now. It was one of Zuckerberg’s early bets, and Meta has been building capabilities with patience. In that, both Musk and Zuckerberg are alike.
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