“We’re going to have to do more with fewer resources,” Meta boss Mark Zuckerberg said Wednesday after the social media giant saw its quarterly revenue decline for the first time in its history.
Meta (Facebook, Instagram) revenue fell 1% year on year in the second quarter to $28.8 billion, and its net profit fell 36% to $6.7 billion. The Californian group is facing competition from other platforms, such as TikTok, and budget cuts from advertisers due to the poor economic situation.
“We are going to slow down the pace of investments and postpone certain expenses,” said Mark Zuckerberg in a conference call with analysts. “We will reduce staff growth over the coming year,” he added. 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 following the close of trading, before stabilizing around -2%.
On the audience side, Facebook has around 1.97 billion daily active users, up 8 million from last quarter, and 2.934 billion monthly active users, down 2 million from last quarter. end of March. 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.
Under close surveillance
Meta has been watched like milk on fire by the market since the start of the year, since the group first announced that it had lost users on its original social network, Facebook. Around 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 more worried about the future of the company,” noted Insider Intelligence analyst Debra Aho Williamson.
The world’s second largest digital advertiser draws its power from its ability to accurately target hundreds of millions of users in an environment where they spend time everyday, socializing or having fun. “But Meta is losing its grip on its huge audience,” the expert said.
“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. And Mark Zuckerberg confirmed this orientation. He said that currently around 15% of the content seen by Facebook and Instagram users comes from recommendations from the algorithm. “These numbers are expected to at least double by the end of the year,” he added.
Hard time for techs
The major platforms are also suffering from the economic situation, which is forcing advertisers to cut their marketing budget. Apple’s data privacy changes have further reduced their leeway when it comes to personalizing ads.
Last week, Snap plunged 40%, the day after the announcement of financial performance deemed disappointing despite a notable increase in the number of Snapchat users. And Google on Tuesday posted the slowest year-over-year revenue growth rate since the second quarter of 2020, when advertisers abruptly shut the floodgates, at the start of the pandemic. Both companies, like many other tech companies, will substantially slow the pace of hiring.
Last fall, Facebook renamed itself Meta to signal a pivot to the “metaverse,” a parallel universe accessible in augmented and virtual reality and touted as the future of the internet. “But as the company is forced to refocus on its fundamentals, its initiatives in the metaverse have lost momentum,” noted Debra Williamson.