The Meta group on Facebook saw its first drop in sales and blames it for economic concerns. The meta also does not expect an improvement in the next few months.
Development is synonymous with the end of an era: things have moved very quickly since the stock market debut in 2012. Founder and CEO Mark Zuckerberg announced that the group now wants to focus on long-term investments.
Meta revenue fell approximately 1 percent year-on-year to $ 28.8 billion in the second quarter. All in all, profits had decreased by 27 percent to almost $ 6.7 billion (around € 6.6 billion). Chief Executive Sheryl Sandberg also noted the strong dollar leading to an unfavorable translation of foreign profits in the balance sheet. Without the increase in the dollar, there would be a three-percent increase in sales – she emphasized during a conference call with analysts.
Sales forecasts for the current quarter fell in the range of USD 26-28.5bn, less than analysts expected. Financial director Dave Wehner cited the weakening of the internet advertising market already visible in the second quarter due to economic uncertainty. “I would say the situation is worse than a quarter of an hour ago,” admitted Zuckerberg. Investors lost 4.65 percent in overtime trading on Wednesday.
Previously, the meta was immune to weak spells
So far, Facebook and Meta have proved resilient to any economic downturn. Because by knowing the interests and social connections of billions of users, the platform offered advertisers the opportunity to target their ads specifically to their desired target groups.
However, the first cracks in the system appeared last year after Apple introduced new privacy policies. Developers like Facebook now have to ask iPhone users for permission if they want to track their behavior across apps and services. Many users rejected this – and thus torpedoed ad models, including on Facebook.
Even so, Facebook and its influence are still huge. The number of users accessing at least one application in the group every day increased from 2.87 billion to 2.88 billion in three months. Facebook saw an increase from 1.96 to 1.97 billion daily users. The group also includes Instagram and WhatsApp.
Adaptation to “Metawersum”
Among Zuckerberg’s long-term initiatives is the company’s focus on the “metaverse” – a virtual world in which he imagines an increasingly changing business and social life. Facebook is at the forefront of the movement with its virtual reality (VR) activities that immerse users with special glasses into digital worlds. Reality Labs, which combines the development of Metaverse and the VR business, reported an operating loss of $ 2.8 billion in the last quarter alone. Meta announced a price increase for its VR glasses a few days ago.
Also on Wednesday, a clear signal came from Washington that the US competition authorities are following the activities of the Metaverse on the Metaverse. The FTC went to court to prohibit the company from acquiring Within Unlimited, which is developing a VR fitness app. According to the lawsuit, Meta wants, among others dominate the entire Metaverse.
In today’s core business, Meta faces competition from the Chinese Tiktok app, which mainly attracts young users with an endless stream of short videos. Clips are suggested by a software algorithm that adapts to the interests of users. A copy of Meta’s short video, entitled “Reels”, is now widely posted on Facebook and Instagram.
Facebook: Falling From the Roots
For the platform, this marks a fundamental departure from its roots: after all, the original idea is that as a user, you can connect with friends, family and colleagues as well as organizations or businesses and then see their contribution. But now 15 percent of the content on users’ feeds on Facebook – and even more on Instagram – comes from someone they don’t follow, Zuckerberg said. This proportion should double by the end of 2023.
It’s also clear that criticism from Instagram users, including celebrities like Kim Kardashian, that the photo service becomes the second Tiktok should have no consequences. The progress of the “drums” is initially not good even for business. Because Meta earns less on ads near the clips than on feed ads or the daily changing so-called user stories. As a result, the more short films spread, the more they crowded out more lucrative formats for the meta, admitted Zuckerberg.
He emphasized that they will continue to rely on them as they increase user activity on the platform and over time bring in a similar amount of money as other formats. The meta admits, however, that it could take years. Right now, Reels’ ad is well on its way to fetching $ 1 billion a year.
Meta also announced a change in leadership on Wednesday. Outgoing CFO Wehner is expected to take over the newly created position of head of strategy in November. Thus, Susan Li will be appointed the new chief financial officer. There was a gap in the management position as Sandberg announced her retirement. She was considered the right hand of Zuckerberg and the architect of Facebook’s business model.
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