Meta had its first revenue decline as it tackles economic downturn

28 Jul 2022

Meta CEO Mark Zuckerberg in 2018. Image: Anthony Quintano (CC BY 2.0)

Mark Zuckerberg said the economic environment will have a ‘broad impact’ on the digital advertising business and the company plans to ‘steadily reduce headcount growth’.

Meta, the parent company of Facebook and Instagram, has issued an underwhelming forecast for the year ahead after reporting its first ever quarterly revenue drop.

The company said its next quarter outlook reflects the weak advertising demand it has been experiencing, driven by “broader macroeconomic uncertainty”, according to Meta CFO David Wehner.

Microsoft and Google also fell short of revenue expectations in their quarterly earnings reports this week, saying a weak ad market and global economic factors influenced performance.

Meta’s total revenue for its second quarter was $28.82bn, a year-on-year decrease of 1pc and below analyst expectations of $28.94bn, according to Refinitiv.

The result continues a downward trajectory after Meta’s first-quarter revenue growth was its slowest in a decade.

Meta’s net income also took a hit, going down 36pc year on year to $6.69bn. Company shares dropped 3.8pc in extended trading after the news was announced yesterday (27 July), CNBC reported.

Daily active users across Meta’s ‘family of apps’, which also includes Messenger and WhatsApp, went up 4pc compared to the same period last year to 2.88bn, just above analyst expectations.

The Reality Labs division, which handles Meta’s augmented and virtual reality operations, generated $452m in revenue but lost $2.81bn.

It comes at the US Federal Trade Commission looks to block Meta from acquiring Within, a company developing a virtual reality fitness app.

Do more with less

On a conference call yesterday, Meta CEO Mark Zuckerberg said there appears to be an economic downturn that will have a “broad impact” on the digital advertising business.

Zuckerberg added that the company is planning to “steadily reduce headcount growth” over the next year. “This is a period that demands more intensity, and I expect us to get more done with fewer resources.”

He also shared plans for some of Meta’s flagship apps. Zuckerberg said he expects more than 30pc of content recommendations on Facebook and Instagram to be served by Meta’s AI by the end of 2023.

“This quarter, we saw a more than 30pc increase in the time that people spent engaging with Reels across Facebook and Instagram,” he added. “AI advances are driving a lot of these improvements.”

But there has been a growing backlash among Instagram users to changes being made on social media platform and the increased focus on Reels. The “Make Instagram Instagram Again” petition has now gained more than 200,000 signatures and claims the app is becoming increasingly like its rival TikTok.

Meta also announced changes to its management structure. From 1 November, current CFO Wehner will become the company’s first chief strategy officer, overseeing the tech giant’s corporate development. Meta’s current VP of finance, Susan Li, will be promoted to CFO.

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Meta CEO Mark Zuckerberg in 2018. Image: Anthony Quintano via Flickr (CC BY 2.0)

Leigh Mc Gowran is a journalist with Silicon Republic