“We’re going to have to do more with less,” Meta boss Mark Zuckerberg said Wednesday after the social media giant saw quarterly revenue fall for the first time in its history.
Between competition from other platforms like TikTok and budget cuts from advertisers due to weak economic conditions, Meta (Facebook, Instagram) revenue fell 1% year-on-year in the second quarter to $28.8 billion.
“This shows how quickly the group’s business has deteriorated,” said Debra Aho Williamson, an analyst at Insider Intelligence.
As for net profit, it fell 36% to 6,700 million.
“The situation seems worse than it was three months ago,” Mark Zuckerberg acknowledged during a conference call with analysts.
He planned to slow the pace of investment, including “reducing staff growth over the next year.” Meta has nearly 84,000 employees worldwide, 32% more than a year ago.
On Wall Street, the company’s stock fell more than 4% during electronic trading after the close of trading.
On the audience side, Facebook increased the number of daily active users to 1.97 billion, but lost 2 million monthly users.
In total, as of June 30, 3.65 billion people around the world used at least one of the group’s four networks and messengers (Facebook, Instagram, WhatsApp and Messenger) every month.
“I’ve never been so worried”
Meta has been watched like milk on fire by the market since the beginning of the year, when the group first announced that it had lost users on its original social network, Facebook.
Around one million daily active users left the platform during the last three months of 2021.
Since the beginning of February, the stock price has halved and more than $400 billion in market capitalization has gone up in smoke.
“I’ve covered Meta for years and have never been more concerned about the future of the company,” said Debra Aho Williamson.
The world’s second largest digital advertiser derives its power from its ability to accurately target hundreds of millions of users, in an environment where they spend time every day, socializing or having fun.
Decelerate
“But Meta is losing control of its huge audience,” the expert noted.
“Their US Facebook user base is just growing, and while Instagram is helping to move the ship forward, we’re starting to see a slowdown with teens and young adults,” he said.
The photo and video app was disrupted this week, when celebrities Kim Kardashian and Kylie Jenner asked it to “go back to Instagram” and “stop trying to be TikTok,” a message widely applauded and repeated by users.
In fact, Meta, like Google on YouTube, has copied TikTok’s format of short, engaging videos, posted by creators and recommended to users thanks to a very powerful algorithm.
Mark Zuckerberg confirmed this orientation. He said that currently around 15% of the content Facebook and Instagram users see comes from algorithmic recommendations.
“These figures should at least double by the end of the year,” he said.
Metavers at rest
Major platforms are also suffering from Apple’s changes to its data privacy policy, which have reduced their wiggle room in terms of ad personalization.
Last week, Snap plunged 40% on the back of disappointing financial performance, despite a notable increase in the number of Snapchat users.
And Google posted its slowest year-over-year revenue growth rate since the second quarter of 2020 on Tuesday.
Both companies, like many other technology companies, will substantially slow down the pace of hiring.
These difficulties hamper Meta in its efforts to build the “metaverse,” a parallel universe accessible in augmented and virtual reality (AR and VR) and billed as the future of the Internet.
They are “forced to refocus on fundamentals,” said Debra Aho Williamson.
On Wednesday, the US competition authority (FTC) also launched proceedings against Meta to prevent it from acquiring Within Unlimited and its VR fitness app Supernatural.
The FTC accuses the US group of “buying market share rather than gaining it on its own merits,” as it says it did when it acquired Instagram and WhatsApp messaging in the 2010s.
Source: BFM TV
