'Meta has a problem': Facebook parent company posts financial loss for the first time
Facebook and Instagram’s parent company, Meta, has posted its first-ever revenue decline, dragged down by a drop in ad spending as the economy falters, and increased competition from rival TikTok.
Key points:
- Global instability, slowdown in the ad market, and competition from TikTok contributed to the losses
- Meta has drawn high profile criticism over platforms like Instagram as users turn to video
- Chief Operating Officer Sheryl Sandberg, driver of Meta’s advertising business, is leaving the company
Meta shares fell just slightly after the results, indicating Wall Street was mostly expecting a weak earnings report.
The company’s total revenue, which consists almost entirely of advertising sales, fell 1 percent to $US28.82 billion ($41.1 billion) in the June quarter, nearly half a billion from a year ago.
The results follow broader declines in rival digital advertising markets such as Snap and Alphabet, Google’s parent company, which reported their slowest quarterly growth in two years.
The results shed light on the unique strain that Meta’s core social media business is experiencing, as it competes for user time with short video app TikTok and aligns its ad business with privacy controls launched by Apple last year.
Meta says Reels, a short video product that is increasingly being included in user feeds to compete with TikTok, now generates more than $1 billion in annual revenue.
“They’re heavily affected by everything, and I’d probably give a third, a third, and a third,” said Kim Forrest of Bokeh Capital Partners, referring to the economy, slowing global ad markets, and competition from TikTok and Apple. .
“Meta has a problem because they’re going after TikTok and if the Kardashians are talking about how they don’t like Instagram…Meta should really pay attention to that.”
Monthly active users on Facebook are also slightly below expectations, although a big advantage for the digital giant is that competitor Meta is also experiencing a decline.
Snap Inc and Twitter both missed sales expectations and warned of a slowdown in the ad market, sparking a sector-wide sell-off.
However, Alphabet, the world’s largest digital advertising platform, reported an increase in quarterly revenue, with sales from its biggest moneymaker — Google search — exceeding investors’ expectations.
Explore the ‘metaverse’
About 15 percent of content on Facebook and Instagram is recommended by AI and that percentage will double by the end of 2023, according to chief executive Mark Zuckerberg.
The world’s largest social media company is making some expensive overhauls to keep its core business pumping profits, while also investing in long-term bets on the “metaverse” — a risky gamble that’s still in its infancy.
Metaverse is a kind of internet that is brought to life, or at least rendered in 3D. Zuckerberg describes it as a “virtual environment” where you can immerse yourself instead of just staring at the screen.
The company invested billions in a metaverse plan that will likely take years to pay off, and as part of its plans it was renamed Meta last fall.
But the challenge is how companies can monetize this new digital space.
For now, the metaverse part of business remains largely theoretical.
In the second quarter, Meta reported $218 million in non-advertising revenue, which includes sales of devices such as the Quest virtual reality headset, down from $497 million last year.
ABC/cable
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