TechnologyFacebook experiences a drop in revenue for the first time
The company led by Mark Zuckerberg, now renamed Meta, experienced a decline in sales in the last quarter for the first time in its history.
“We’re going to have to do more with less,” Meta boss Mark Zuckerberg said Wednesday after the social media giant saw its quarterly revenue decline for the first time in its history.
Between competition from other platforms like TikTok and advertiser budget cuts 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, analyst at Insider Intelligence. As for net profit, it fell 36% to 6.7 billion.
“The situation seems worse than three months ago,” acknowledged Mark Zuckerberg during a conference call with analysts. He planned to slow the pace of investment, including “reducing staff growth over the coming 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% in 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 all, 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.
“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. About one million daily active users left the platform during the last three months of 2021. Since early February, the share price has halved and more than $400 billion in market capitalization has gone up in smoke. “I’ve covered Meta for years and I’ve never been so worried about the future of the company,” remarked 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 on a daily basis, socializing or having fun. “But Meta is losing its grip on its huge audience,” noted the expert. “Its US Facebook user base is barely growing, and while Instagram is helping to move the boat forward, we’re starting to see a slowdown with teens and young adults,” she said.
The photos and videos app was heckled this week, when celebrities Kim Kardashian and Kylie Jenner called on it to “go back to Instagram” and “stop trying to be TikTok”, a message widely applauded and relayed by users.
Meta, like Google on YouTube, has indeed copied the format of short and captivating videos from TikTok, published 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 seen by Facebook and Instagram users comes from algorithm recommendations. “These figures should at least double by the end of the year,” he said.
The metaverse on pause
Both companies, like many other tech companies, will substantially slow the pace of hiring. These difficulties hinder Meta in its efforts to build the “metaverse”, a parallel universe accessible in augmented and virtual reality (AR and VR) and presented as the future of the internet. They are “forced to re-focus on the fundamentals,” noted Debra Aho Williamson.
On Wednesday, the US competition authority (FTC) also launched proceedings against Meta to prevent it from acquiring Within Unlimited and its physical exercise application in VR Supernatural. The FTC accuses the American group of “buying market share instead of gaining it on merit”, as it did, according to it, by acquiring Instagram and WhatsApp messaging in the 2010s.