Facebook parent company: Meta business is shrinking

As of 07/28/2022 08:54

For the first time since the stock exchange debut in 2012, the sales of the American internet giant Meta fell. The group also does not expect the situation to improve in the coming months. Is this the end of an era?

Meta, Facebook’s parent company, reported the first drop in sales since it went public ten years ago, blaming the weak economy. The meta also does not expect an improvement in the next few months. After years of rapid growth, development is synonymous with the end of an era. Facebook founder and CEO Mark Zuckerberg said the company wanted to focus on the long term.

Meta revenue fell approximately 1 percent year-on-year to $ 28.8 billion in the second quarter. Most importantly, profits have decreased by 27 percent to nearly $ 6.7 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.

Weak internet advertising market

This means that sales were still below the analysts’ expectations, who had already forecasted a weak quarter after the problems on Snap and Twitter. Meta CFO Dave Wehner cited the weakening of the internet advertising market already seen in Q2 due to economic uncertainty. So far, Facebook and Meta have proved resilient to any economic downturn.

Knowing the interests and social connections of billions of users, the platform offered advertisers the ability to target their ads to their desired audience. In addition to stiff competition from the TikTok video platform, Meta struggles with Apple’s data protection policies. Developers like Facebook must now explicitly ask iPhone users for permission to track their behavior across various apps and services. Many users have rejected this – torpedo ad models, including on Facebook.

the number of users is increasing

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.

Meta also announced a change in management yesterday. 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. After Sandberg announced her retirement, there was a gap in the executive floor. She was considered the right hand of Zuckerberg and the architect of Facebook’s business model.

Antitrust watchdogs target the VR business

One of Zuckerberg’s long-term initiatives is the company’s focus on the “metaverse” – a virtual world into which he imagines the transfer of business and social life. Facebook pioneered this movement with its Virtual Reality (VR) activities in which users wearing special glasses immerse themselves in the digital world. Reality Labs, which combined the development of Metaverse and the former VR business, reported an operating loss of $ 2.8 billion in the past quarter. Meta announced a price increase for its VR glasses a few days ago.

However, the VR Meta business is under threat from US competition authorities. The US antitrust authorities are targeting Meta’s strong market position in the VR industry for the first time. The FTC went to court to prevent Meta from purchasing a real estate developer.

Less competition through an acquisition?

Within Unlimited, which Meta is looking to buy, is behind a VR fitness app called “Supernatural.” The FTC argues that Meta wants to occupy this market with its “VR empire” through acquisition, rather than competing with its own offering there. According to the lawsuit filed yesterday, the takeover could lead to less competition and potentially higher prices. “And the Meta would be one step closer to the ultimate goal of having the entire Metaverse.”

Meta already has a VR application “Beat Saber”, which is also dedicated to traffic. In recent years, the group has acquired several VR specialists. According to media reports, Meta wants to spend over $ 400 million on the purchase of Within, which was announced last fall. Meta replied that the FTC’s lawsuit was based on “ideology and speculation” and not on facts. According to the blog post, the accusation that the takeover would be anti-competitive was “unbelievable.” Among other things, “Beat Saber” and “Supernatural” are fundamentally different, argued Meta. Under Lina Khan’s new boss, the FTC takes a tougher stance against the big tech companies that have long benefited from rather loose competition regulation in the United States.

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