Like most big announcements by massive, globally known companies, Facebook’s recent description of its rebranding as Meta was not something it came up with on the spur of the moment. For people paying attention, even the form of the renovation is not much of a surprise, though the announcement prompted some skepticism and confusion among casual consumers.

To start, let’s review what the shift to Meta means. Rather than replacing the Facebook brand completely, it creates a new, umbrella organization that contains various branches and arms. Some of them are familiar, like Facebook, Instagram, and WhatsApp. Other divisions are new, including a dedicated virtual reality (VR) and augmented reality (AR) research division, called Reality Labs, that already employs about 10,000 engineers and designers. And then some elements involve more traditional rebranding, such as changing the Oculus branding of VR hardware to bear the Meta name.

In addition, the company has not undergone any major operational shifts; its well-known and often controversial founder Mark Zuckerberg remains in charge. Instead, the shifts are strategic, reflecting Facebook’s determination to move beyond social media platforms and establish a metaverse, in which distinct digital worlds could combine. That is, the new platform would encompass digital and online functions but also AR and VR, in one cohesive space. This imaginative target raises clear risks, without any evident assurances that it actually will become the future of digital interactions. But despite the risk and resistance or skepticism from some stakeholders, in trying to become Meta, Facebook also appears to be seeking out some novel, increasingly necessary benefits.

First, it wants to stay relevant. For years, Facebook’s demographics have been trending older. Such trends were part of its impetus to purchase Instagram and copycat some of the most appealing elements of TikTok and Snapchat. But even if these efforts might have gained it a bit of cache, they also appear insufficient to stop the wider exodus of users. Taking a different perspective, using theories about the lifecycles of innovative firms, Facebook appears to be well into its maturity stage, and perhaps even entering its decline. If it can adopt a radically new approach and innovate in a new realm, perhaps it can reinvent itself and survive in a new form, stronger and more competitive than before.

Second, beyond its appeal to younger audiences, Facebook continues to risk losing customers due to the ongoing scandals and reputational damage it has suffered. From the Cambridge Analytica data breach to recent whistleblower testimony alleging that the social media company knew precisely how damaging the content on its site could be for users, the events paint Facebook in a very negative light. For many users, these issues are too burdensome for them to continue supporting the company, leading them to agree to boycott the platform for a day or two or even leave altogether.

Third, the ethical concerns also have prompted ever more regulatory scrutiny of Facebook. By branching out into different markets and platforms, such as VR and AR capabilities, it might be trying to avoid some of that scrutiny. That is, some lawmakers have suggested that Facebook has an overly dominant position and should be broken up, to avoid any sort of monopoly power. If it can start competing effectively in another market, it can point to this sort of diversification as a reason to remain intact. It also lowers the risk of detrimental outcomes if it were to be forced to alter its structure, because it could still rely on income from another market.

Fourth, another risk that Facebook persistently encounters is its reliance on semi-competitors such as Google and Apple, which produce the devices on which the vast majority of users access their Facebook or Instagram accounts. Although its popularity gives Facebook some protection, arguably Apple and Google could remove its app from their platforms. More realistically, the new privacy protections imposed by Apple have limited Facebook’s ability to gather user data, which represents a critical element to its competitive success. It uses these data to attract advertisers to appear on its site, and those transactions represent 98 percent of Facebook’s total revenue.

So it seems clear that Facebook needs to change. But what type of change is going to provide it with the most benefits? Or perhaps more precisely, what can it do to stave off irrelevance, regulatory restrictions, and the risk of lost revenue?

Discussion Questions:

1. What is a metaverse?
2. What kind of the rebranding is the introduction of Meta as an overarching name for the Facebook family of brands?
3. Which of the reasons listed here provide a good rationale for the rebranding? Which seem less appropriate?

Source: Mike Isaac, “Facebook Renames Itself Meta,” The New York Times, October 28, 2021; Kevin Roose, “The Metaverse Is Mark Zuckerberg’s Escape Hatch,” The New York Times, October 29, 2021; Kevin Roose, “Facebook Is Weaker than We Know,” The New York Times, October 4, 2021; Shira Ovide, “Facebook Wants the Young People Back,” The New York Times, October 26, 2021; Shira Ovide, “Google and Facebook’s Ad Empires,” The New York Times, October 28, 2021