Meta, Facebook’s parent company, saw revenue fall for the first time in its history and profits shrink for the third straight quarter as TikTok’s popularity grew and advertisers became more cautious.
CEO Mark Zuckerberg warned investors on a conference call that “we seem to have entered an economic slump that will have a broad impact on the digital advertising sector.” “I’d say the situation has deteriorated significantly in the last quarter.”
For the duration of the crisis, he added, Meta will reduce its expenditures and cut down its employment.
A period of greater intensity and fewer resources is required, and the president stated that this is what they expect from them.
Since its first-ever drop in daily Facebook users was reported at the end of last year, Meta’s market value has nearly been slashed in half.
In the three months ending in June, revenue fell 1% from a year earlier to $28.8 billion, which was more than Wall Street analysts expected. Meta blamed the revenue decline on the strengthening dollar, claiming that it would have seen a 3% rise otherwise.
According to the company’s forecast for sales in the current quarter, the company expects sales of between $26 billion and $28.5 billion.
A 36% drop in profits resulted in a loss of $6.7 billion.
However, there was some good news in Meta’s latest quarterly report: people continue to use Facebook. Wall Street had predicted a drop in daily users, but the rise of 3 percent to 1.97 billion users defied expectations.
Businesses are cutting back on ad spending in the face of rising inflation, interest rate increases, and other economic woes, and Meta’s results are the latest evidence of a long-term slowdown in the digital ad market. As a result of the ongoing macroeconomic unrest, the company attributed its weak third-quarter revenue projections to “weak advertising demand.”
Apple’s privacy changes, which have made it more difficult for social media companies to target ads to smartphone users based on their online activity, have also had an impact.
Following poor results from Snapchat and Twitter, investors chopped tens of billions of dollars from the market capitalization of ad-dependent digital businesses.
This was Snapchat’s poorest quarter-on-quarter revenue growth ever, much lower than it had predicted back in May. The business stated it couldn’t predict the future since the current scenario was too volatile to do so.
In a surprise income decrease, Twitter blamed jittery advertisers and a contentious sale agreement with Elon Musk.
As of Tuesday, Google’s growth rate was the weakest it had been since early on in the flu epidemic.
Meta is attempting an ambitious shift in the face of increased competition over a decreasing pool of advertising money. TikTok, the Chinese-owned app popular with younger users, is influencing Facebook and Instagram by filling users’ feeds with short videos from celebrities and random strangers.
A TikTok-like short video format called Reels and investments in artificial intelligence technology were highlighted by Zuckerberg during Meta’s earnings conference on Wednesday. Meta uses these technologies to propose content on their applications and assist marketers focus their messaging.
According to Facebook CEO Mark Zuckerberg, about 15% of posts that appear in user feeds on Facebook and Instagram are now from accounts that the company’s AI believes they may enjoy. It is Meta’s goal by the end of 2023 to more than double that percentage.
Because Reels are seen for longer periods of time, Meta is losing money from ad revenue despite the fact that viewers are spending more time watching them.
In addition, some high-profile users are reacting angrily to the modifications. Kylie Jenner and Chrissy Teigen have all expressed displeasure with Instagram’s current emphasis on video and attempt to mimic TikTok’s features.
To respond to users’ concerns, Instagram CEO Adam Mosseri issued a statement saying that some of the app’s updates are “not yet good.”
However, as he pointed out, “Honesty is required of me. Instagram, I feel, will become more and more video-centric in the future.”
He asserted that because of the rapidity with which the world is changing, the firm must also adapt.