#SocialStocks: Twitter Skips Out On Rent And Google Cloud Bills

VR sales lower as new competition is set to arrive, Louisiana enacts parental control legislation and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

EVICTED: 

According to court documents, Twitter (TWTR) owes three months’ rent to its landlord in Boulder, Colorado, and a judge has signed off on evicting the company from the location, TechCrunch’s Devin Coldewey reported.

ALTERNATE REALITY: 

Circana analyst Ben Arnold said that VR sales in 2023 have been significantly lower than last year, with unit sales declining by 70%. Higher prices last summer contributed to the decline in unit-sales volume. Increased supply of current-generation game consoles has had an effect, as well, challenging VR for a portion consumers’ technology spending. The biggest challenge confronting the market for VR and other mixed reality devices, however, is the lack of new, innovative products. The relatively few new headsets released over the past 18 months have focused more on niche audiences, like VR users in enterprise settings or PS5 (SONY) owners in the case of Playstation VR 2. The MR market is in search of a device that will be universally adopted. The launch of new products from Apple (AAPL) and Meta (META) importantly will broaden the selection of devices consumers have to choose from. With new hardware designs and updated specifications, there are more premium, mid-tier, and entry-level products available to suit a wider array of preferences and budgets, Arnold noted. New findings from the Circana Connected Intelligence Wearables Ownership Report confirm that men aged 25 to 34 are twice as likely to own a VR headset than the average consumer to own a VR headset; this group is also the most likely to report purchase intent for VR products (54%). The addition of new extended reality products and applications could potentially entice a different user than the young early adopters who are typically drawn to new technology products. “Though VR headsets and smart glasses will not appeal to every consumer, our current fascination with the Metaverse and other immersive digital environments requires participation from users of many stripes,” the analyst added. “With an expanding market of devices, consumers have more options to experience this technology and its appeal should grow. The market for extended reality devices will only get more crowded from here – brands that deliver the best experiences and capture the most engaged audiences will win.”

Meta CEO Mark Zuckerberg addressed Apple’s Vision Pro headset at a meeting on Thursday, telling employees that it “could be the vision of the future of computing, but like, it’s not the one that I want,” The Verge’s Alex Heath reported. He also pointed to the fact that Meta’s upcoming Quest 3 headset will be much cheaper, at $499 compared to the Vision Pro’s $3,499 price tag, saying that “I think that their announcement really showcases the difference in the values and the vision that our companies bring to this in a way that I think is really important.”

Zuckerberg also showcased a video of how Reels will work on its Quest virtual reality headset, according to The Verge. It is not yet clear whether the feature will exist within Meta’s Instagram app for Quest or if users can test it, the article noted.

ARK:

Cathie Wood’s ARK Investment bought 175K shares of Meta Platforms.

MUSICGEN: 

Meta has released its own AI-powered music generator called MusicGen and has released a demo for the tool, TechCrunch’s Kyle Wiggers reported. The tool can turn a text description into roughly 12 seconds of audio, the author noted. 

BILLS BILLS BILLS: 

Twitter has refused to pay its Google Cloud (GOOG, GOOGL) bills as its contract comes up for renewal this month, Platformer has learned, leading to a high-stakes conflict between the companies that could result in Twitter’s trust and safety teams being crippled, the publication’s Zoe Schiffer and Casey Newton report. While Twitter hosts some services on its own servers, the company has long contracted with Google and Amazon (AMZN) to complement its infrastructure, the authors note. Prior to Musk buying Twitter last year, the company signed a multi-year contract with Google to host services related to fighting spam, removing child sexual abuse material, and protecting accounts, among other things.

INSIDE SALE: 

The COO of Zoom Video (ZM) Aparna Bawa disclosed in a regulatory filing that he had sold 7,000 shares of company stock at $69.17 per share on June 6, for a total transaction amount of $484,213.

LOUISIANA INTERNET LEGISLATION: 

Over the past year, legislators concerns over children’s online safety has led to many protective measures, wrote Natasha Singer for the NY Times. States like Utah and California have enacted legislation directed at children’s online safety and now Louisiana has passed legislation that is wider and “could affect access to large swaths of the internet for minors in the state.” added the NYT story. “The measure would allow parents to cancel the contracts underlying their children’s accounts on sites like TikTok, Instagram, Roblox (RBLX) and YouTube,” noted the NY Times.

INFLUENCE OF AI: 

Meta CEO Mark Zuckerberg unveiled a plan to staff on Thursday that will see the Facebook parent put generative AI text, image, and video generators into its flagship products, Axios’ Ina Fried reported. At an all-hands meeting with employees, Zuckerberg announced a range of technologies at various stages of development, with some for use within the company but many designed specifically for consumers,

CHANNELS: 

Meta’s WhatsApp introduced Channels, a private way to receive important updates from people and organizations, right within WhatsApp. “We’re building Channels in a new tab called Updates – where you’ll find Status and channels you choose to follow – separate from your chats with family, friends, and communities,” the company said. “Channels are a one-way broadcast tool for admins to send text, photos, videos, stickers, and polls. To help you select channels to follow, we’re building a searchable directory where you can find your hobbies, sports teams, updates from local officials, and more. You can also get to a channel from invite links sent in chats, e-mail, or posted online. We’re aspiring to build the most private broadcast service available. This starts by protecting the personal information of both admins and followers. As a channel admin, your phone number and profile photo won’t be shown to followers. Likewise, following a channel won’t reveal your phone number to the admin or other followers. Who you decide to follow is your choice and it’s private. Similar to how we build messaging, we don’t believe Channel updates should have to stick around forever. So we’ll only store channel history on our servers for up to 30 days and we’ll add ways to make updates disappear even faster from follower’s devices. Admins will also have the option to block screenshots and forwards from their channel. Lastly, we’ll make it possible for admins to decide who can follow their channel and whether they want their channel to be discoverable in the directory or not. Given the aim of Channels is to reach a wide audience, channels are not end-to-end encrypted by default. We do think there are some cases where end-to-end encrypted channels to a limited audience might make sense, such as a non profit or health organization, and we’re exploring this as a future option as well.” The company said that, to kick off Channels, it is working with global voices and select organizations in Colombia and Singapore, where Channels will first be available, to build, learn, and adapt the experience. “We’ll bring Channels to more countries and the ability for anyone to create a channel over the coming months,” WhatsApp added.

ANALYST COMMENTARY: 

Wells Fargo initiated coverage of Snap (SNAP) with an Equal Weight. The firm said the company is monetizing well in North America but with weakening engagement. International engagement is “solid,” though monetization is a struggle, the firm told investors. Gawrelski initiated coverage of Pinterest (PINS) with an Equal Weight rating. The firm said Pinterest must drive deeper and more frequent user engagement and secure enhanced visibility into conversion attribution, either through native checkout or third-party retail media partnership. Either drives significant value unlock, the firm told investors in a research note. Lastly, Wells Fargo initiated coverage of Meta Platforms with an Equal Weight rating. Near-term upside and optimism on healthy ad acceleration and Advantage+ adoption is likely capped by expected Q3 guidance to 2024 investment in AI and Metaverse initiatives.

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Originally Posted June 14, 2023 – #SocialStocks: Twitter skips out on rent and Google Cloud bills