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ABOUT JOHN COOGAN:
I am the co-founder of http://soylent.com and http://lucy.co, both of which were funded by Y Combinator (Summer 2012 and Winter 2018).

I've been an entrepreneur for the last decade across multiple companies. I've done a lot of work in Silicon Valley, so that's mostly what I talk about. I've raised over 10 rounds of venture capital totaling over $100m in funding.

I work mostly in tech-enabled consumer packaged goods, meaning I use software to make the best products possible

CONTACT:
You can get in touch with me via Twitter: https://twitter.com/johncoogan

Disclaimer: This video is purely my opinion and should not be regarded as a primary source. I am not a financial advisor and this is not a recommendation to buy or sell securities. Always do your own due diligence.

Facebook's parent company, Meta, announced major layoffs.

Facebook's parent company is giving another 10,000 workers the axe.

I take full responsibility for this decision.

At least that's what most YouTubers want you to think.

Facebook used to be the cool social media platform that came and slapped around MySpace and put it in its grave.

Zuck has been through political controversies, government lawsuits, and watched while his company lost $700 billion in market cap in just a few months.

On top of that, let's be honest, Facebook just isn't cool anymore.

No 1 uses it, so it can't be making that much money.

Well, the truth is much more complicated.

the numbers, we need to understand what happened on November 9th, 2022.

At the time, Meta's stock was down by more than 75%.

And the Facebook parent company losing nearly 70% of its value this year alone.

An insane drop for a company worth over $1 trillion and considered 1 of the best tech companies in

Things looked bad, and Zuck knew he had to start making tough decisions.

He laid off 13% of Meta's workforce, more than 11,000 people, And then he put a hiring freeze in place that would last for months.

Meta had simply grown too big over the past few years, and the spending was getting out of control.

Zuck wrote a letter to the impacted employees apologizing.

It seemed like Meta could be in a downward spiral, losing money, firing more people, all bad signs.

The company's stock price started climbing and went on 1 of the greatest rallies in tech history.

Over the next 9 months, the stock appreciated by 270%.

Mark Zuckerberg personally made over $80 billion, and the company was once again worth nearly a trillion dollars.

It's an incredible comeback story, but those November layoffs were just the first piece of the puzzle.

There are actually 10 important reasons why Facebook lives on, and you should never assume Zuck is down for the count.

The most obvious reason that everyone likes to hate on Facebook is that the site just feels dead.

Plenty of American millennials will tell you the same story.

They loved using Facebook in college, but over the past few years, the site has become complete junk and they don't check it anymore.

I'm certainly in that group, and even though the narrative feels true, the numbers tell a very different story.

See, meta as a whole is still growing their overall user base.

2.93 billion people use meta products daily, and 3.71 billion people use their services monthly.

And those numbers are still growing by tens of millions of people.

a lot of that growth is coming from Instagram and WhatsApp, but not all of it.

Facebook proper, the blue app that feels totally dead, is still growing.

Most recently, they added 16 million users to hit 1.98 billion total daily active users.

Places like India, Brazil, and Indonesia are newer to Facebook and still ramping up their usage.

idea that Facebook is dying in America is just wrong.

they aren't declining, which means that people who do like posting on Facebook are sticking around.

Too many people are still pattern matching against the early days of social networking.

Before Facebook, Myspace was the dominant social network, and it was huge.

But when Facebook came along, MySpace quickly became irrelevant and really did die off.

The network is so large that there are still plenty of thriving communities on there that will likely never leave.

It might have lost its social relevance and not be seen as the cool social network anymore, but for certain groups of

Okay, so if the core Facebook app isn't dying, what about Instagram?

Make no mistake, the app has been under assault for years.

Snapchat was the first big disruptor in the space.

It started as a messaging app, and didn't look like a competitor to Instagram at all.

But when Snapchat rolled out Stories, it became clear that Instagram had a real competitor.

Disappearing Stories had a unique value proposition compared to Instagram.

They were ephemeral, so you didn't need to think so hard about what you would post.

Photos and videos would go out to a smaller audience, usually just your real friends, and then disappear after 24 hours.

If you didn't look perfect in that photo, who cares?

Instagram had been taken over by professional models and influencers who would spend hours taking photos with expensive cameras and perfect lighting.

The average person just couldn't compete, so they started to feel less confident about posting on Instagram.

Snapchat offered a return to the casual posting that drew people to Instagram in the first place.

Snap's valuation was climbing into the billions, and Zuck was starting to get worried that the company would be a real threat.

Now, Zuck had a playbook for dealing with these pesky upstart social networks.

In 2012, he bought Instagram for $1 billion, and then 2 years later, he bought WhatsApp for an insane $16 billion.

First off, the CEO of Snap, Evan Spiegel, was already a wealthy guy.

And more importantly, I think he liked the idea of going toe-to-toe with the biggest name in social media.

The government was also complicating things for Zuck.

The Federal Trade Commission had gotten really aggressive about policing big tech companies.

Every acquisition would go under the microscope and most would have to deal with complicated lawsuits.

So buying Snap was off the table and Zuck was left with only 1 option, copy Snapchat's killer feature, Stories.

In August of 2016, Instagram added disappearing stories to the app.

Hardcore Instagram users didn't like how the app was changing, and lots of people thought it was anti-competitive for Zuck to copy a rival company.

They didn't kill Snapchat, but they hurt them pretty seriously.

1 report showed that Snapchat's growth slowed 82% after Instagram stories launched.

Basically if you were on Instagram You now didn't need to go to Snapchat to watch stories So the app could keep on growing and it did Instagram now has over 2 billion monthly active users and Zuck was able to repeat this playbook when TikTok started pressuring them.

Which brings us to our fourth narrative violation.

Everyone thinks TikTok is going to single-handedly dismantle Zuck's social media empire, but that's simply not true.

The app has a billion monthly active users and has clearly captured the social relevance that Facebook and Instagram used to dominate.

But Zuck has been aware of the TikTok threat for years.

All the way back in 2016, Zuck tried to buy Musical.ly, the predecessor to TikTok, and when he couldn't, he launched a directly competitive app called Lasso in 2018.

Even though Musical.ly was pretty small by Facebook's standards, they had a strong foothold in China, and Zuck wanted to expand there.

Back in 2016, China wasn't the geopolitical hot topic

Every big tech CEO saw China's massive population and their staggering economic growth as a huge opportunity.

Getting Facebook products into China would be a great new engine of growth for the company if they could pull it off.

Most tech CEOs would just dispatch someone on their team to go figure out China, but not Zuck.

He became obsessed with the problem and took some really aggressive measures.

He learned Mandarin so he could speak directly to business leaders and government officials in China.

He also visited the controversial Tiananmen Square and went jogging with Chinese Communist Party officials.

No tech CEO would do something like this today.

Zuck invited the founder of Musical.ly, Alex Zhu, to visit Facebook's Menlo Park headquarters.

to Shanghai to tour Musical.ly's offices there.

But the deal fell through, probably for political reasons, and the 2 companies have been fighting it out in the short-form video market ever since.

Once Musical.ly had rebranded to TikTok and really started blowing up, Zuck knew he had to do something to stem the bleeding, so he ran the Stories playbook all over again.

Instagram launched Reels, a direct TikTok competitor, in August of 2020, and the usage has been growing ever since.

It took a few years to really have an effect, but recent data shows that TikTok's growth is basically plateauing.

Now, there's always a risk when these new features launch.

They could cannibalize app usage and overall time spent on the app could basically be flat.

Every minute spent on TikTok is a minute not spent on Instagram.

So it's really important that Zuck's plan actually expands Instagram's usage.

Reels is growing like crazy and only increasing the amount of time people spend on Instagram.

And at the end of the day, the thing that matters most is revenue.

Instagram Reels will only be a success if it can make lots of money, but that plan seems to be working.

Zuck announced that Reels is making $3 billion per year, just shy of the $4 billion TikTok made in 2021.

The key thing to remember here is that Zuck's goal is not to kill TikTok outright.

Well, maybe it is, but he doesn't need to do that to be successful.

He just needs to stop Instagram users from switching over to TikTok, and it looks like the plan's working.

It's not just Facebook and Instagram that are bolstering Meta's resilience, though.

Zuck also has a complete sleeper app that most people forget about, our fifth key driver, WhatsApp.

When Zuck paid $16 billion for WhatsApp in 2014, everyone thought he was crazy.

After all, the company had just 55 employees at the time.

But since the acquisition, WhatsApp has turned into a monster with more than 2 billion daily active users.

It's not as flashy as TikTok or Instagram, but it's steadily growing in terms of popularity and influence.

As big social networks become increasingly driven by algorithms, it's harder and harder to connect with people you actually know.

Lots of people who use social media apps never post at all.

In fact, back in 2021, a study found that just 25% of Twitter users produced 97% of all tweets on the site.

If you're just an average user, it's hard to keep up with people whose job it is to create content.

But WhatsApp helps bridge the gap for billions of people.

They can connect with people on an individual basis, or hang out in smaller, trusted group chats where no 1 is getting paid to post.

The smaller social networks that pop up on WhatsApp

are extremely sticky and keep people using the app for years.

It's the last real place to check in with your close friends on a regular basis.

These 3 core apps form the backbone of what Meta refers to as its family of apps.

They all have billions of users and collectively help produce over $100 billion in revenue every year.

But this revenue comes from ads, and Meta's ads business has been under assault for the past few years, which leads us to our sixth narrative violation.

On September 16th, 2020, Apple officially released iOS 14.

To most consumers, It was a pretty boring update.

The biggest addition was home screen widgets, a feature that had been available on Android for years.

It also made the incoming call notification a bit smaller.

But down the road from Cupertino, Zuck was sweating in his Menlo Park headquarters.

See, behind the scenes, Apple had just thrown a massive wrench in the trillion-dollar online advertising industry.

It was a small change that most iPhone users barely noticed, but it was a huge change to how digital ads were served up on iPhone apps like Facebook and Instagram.

Basically, there would now be a pop-up notification in every app that asked the user if they wanted to be tracked by the app they were using.

a way to give iPhone users more control over their privacy, but really it

You could either ask app not to track or allow tracking.

to be tracked, you could still use the app normally, so most people click that.

But this meant that advertisers could no longer tell if the people they were advertising to were actually buying their products.

The net effect of this was that advertisers would spend less, since they couldn't be assured that their ads were working.

Zuck and his team told investors that this change would reduce their revenue by $10 billion per year.

It was a staggering hit, since this would basically translate to $10 billion in lower profits too.

This iOS 14 change from Apple is referred to as App Tracking Transparency, or ATT for short.

Every conversion could be measured deterministically.

If someone saw an ad and then installed an app or bought something on an e-commerce site, Meta could draw a straight line from 1 event to the next.

This is what made Facebook advertising so powerful.

You'd never get this level of precision with a billboard or a Super Bowl ad.

The explosion in these precisely measured digital ads created entirely new industries.

Advertisers switched from thinking about the cost of an ad campaign to focusing on how much revenue could be generated.

Direct-to-consumer brands grew from nothing into the millions seemingly overnight, and mobile games produced billions

Hate it or love it, precise digital advertising created tons of new business opportunities that would otherwise have not existed.

But AT&T destroyed the link between advertising and conversions.

The entire online advertising industry was now structurally less valuable.

But this didn't kill online advertising outright, as many had predicted it would.

If you've used Facebook or Instagram recently, you're obviously still seeing ads, probably more than ever.

Even though the advertising was less precise now, the overall pie was still growing, and Meta was in a great position to capture that.

As more people joined Meta's family of apps and started using features like Stories and Reels more than ever before, the overall number of ads that they could show grew, which drove overall revenue growth.

The reason why goes deeper than just, Meta is big, though.

The resilience of Meta's ad business comes from our seventh point.

Zuck has an incredible artificial intelligence strategy.

few months ago, lots of people were making fun of Zuck for picking the wrong mega trend to anchor his company to.

They said he was going to rename his company again from Meta to AI, which to be fair is funny.

But let's be honest, he wasn't asleep at the wheel when it comes to AI.

He has a great team of AI folks led by the legendary Jan Lekoon and has been releasing AI products for years.

The impact of AI at Meta will take 2 forms.

The first is extremely boring, but important, and the second is extremely cool, but less certain in

Apple's app tracking transparency change broke the deterministic link between ads and conversions.

The solution to this problem is clearly artificial intelligence.

It's just a bunch of data crunched together to approximate statistical outcomes.

But that's perfect for targeting advertisements in

how the TikTok algorithm feels scarily good at predicting what you want to watch next after using it for

a few hours, Meta is implementing the same technologies to predict what advertisements you are most likely to click on.

It's always weird when an ad feels a little too relevant.

Now most of this is just confirmation bias.

You see thousands of ads, but you only notice the 1 for the product that you were just talking about.

Some of it is just random chance, but AI algorithms will make this happen more and more frequently.

Weird correlations between behavior in the app, who you're connected to, and what you're watching will all combine to surface hyper-targeted ads, and some of those are gonna be a bit freaky.

But I don't really have a problem with this.

I'd rather see ads for stuff I'm interested in than random junk.

And it's certainly good for the businesses that need to advertise in order to grow.

There are tons of entrepreneurs out there who just wanna grow their businesses and Facebook and Instagram are the most reliable way to do it.

Apple took away their ability to precisely track ads, but AI is making up the difference.

So that's the boring but important piece of Meta's AI strategy.

Zuck recently released LLAMA 2, Meta's open-source, large-language model.

It's like a free version of OpenAI's ChatGPT, and hackers love it.

Zock is winning over hackers like George Hotz because there's a big fear right now about 1 company controlling the future of artificial intelligence.

Open-sourcing LLAMA gives anyone the ability to permissionlessly develop new AI applications.

Hackers get to run wild with this new technology and build whatever they want.

But the question is, how does Meta benefit from open-sourcing LLAMA?

First, it serves as a great recruiting tool.

When a kid plays with Llama at home, maybe they'll want to go work at Meta in the future.

But more importantly, it should help Meta further advance their core advertising business.

They ran this same playbook with their open-source front-end software library, React.

They obviously needed to build highly performant websites, But the software framework wasn't core to their business model, so they open-sourced it.

Then community improvements to React can roll into their core product.

Generating text from a large language model like Llama benefits Meta immensely.

They can use the system to automatically generate lots of different taglines for ads, and then test those across the entire ad network to see what performs best.

And ultimately, if people are generating content using AI systems, they'll need to share it somewhere and Meta's networks will benefit.

But generative AI could still wind up being much more impactful to Zuck's long-term vision beyond just ads.

Remember that terrible Metaverse demo where it looked like Nintendo Wii graphics?

Well, there were a few problems with that, but generative AI can really help here.

First off, the biggest burden when it comes to developing immersive 3D worlds, the kind that you see in Grand Theft Auto and Red Dead Redemption is always asset creation.

of time to build out a big 3D world, and that's why all the current metaverse applications just feel kind of empty.

But if generative AI evolves to a point where textures, 3D objects, NPC dialogue trees, and whole worlds can automatically be generated, it might actually be a place where people want to go and hang out.

You can see glimpses of this with Midjourney.

Every time I generate a cool sci-fi image, I think of how fun it would be to run around and explore that world.

Generative AI unlocks this, but it's not Zuck's business to own the models that create content in the metaverse.

He just wants to build the headsets and network where all this activity is happening.

And this leads us to reason number 9 for Zuck's recent comeback.

Now, make no mistake, the entire metaverse project is still a huge gamble by Zuck.

last year, Meta lost $15.7 billion on the project.

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Facebook Should Be Dead By Now