Something that we all kind of feel (or at least most of us) seem to be happening. After the year started off somewhat bleak for Facebook and Meta, and despite the rebranding and focus on the metaverse, it looks like Meta is in trouble. The Verge reports: that for the first time ever, the company has reported a drop in sales.
Meta reports revenue decline for the first time
The non-stop revenue growth that Facebook has been seeing for ten years has now hit a wall. The new report of the social media company points to its first-ever annual revenue decline for the second quarter. There’s a 1 percent drop to $28.8 billion (yes, we know, that’s still a lot of money), but forecasted growth for the third quarter could fall even more. In addition, Facebook’s parent company Meta’s total net income (profit) fell 36% to $6.7 billion (down from $10.4 billion in 2021). And, sadly because of Mark Zuckerberg’s metaverse ambitions, the department responsible for building those virtual reality worlds, called The Reality Labs, lost $2.8 billion in the same quarter.
This decline in revenue growth was expected on Wall Street and came as no surprise to investors. Nevertheless, it underlines that Meta’s company faces serious challenges.
First, we all know (or probably heard of) Apple’s App Tracking Transparency, a feature that blocks third-party tracking for ads, something Facebook relied heavily on. It made ads on iPhones less effective and ultimately more expensive the social media company $10 billion in ad revenue last year. And now, on top of that, the slowing economy has prompted advertisers to cut spending further.
TikTok is one of the main rivals Facebook and Instagram are currently facing with its ever-growing popularity. In an effort to become more competitive, Meta’s shifted its focus from Facebook and Insta to short videos and featured posts. Zuckerberg has reportedly stated that the percentage of unfollowed content you see on those two social media platforms will more than double next year. And Meta is building a precious AI to do just that.
But it’s not all bad news for Meta. Despite declining revenue, Facebook reported daily user growth, growing 3% to 1.97 billion. A total of 2.88 billion now use its social apps (Facebook, Messenger, Instagram and WhatsApp) on a daily basis.
An increase in video consumption has shown stronger-than-expected engagement trends, Zuckerberg said. In addition, Reels reportedly makes money faster than Stories (when Meta copied Stories from Snapchat). Looking to the future, Meta expects Reels to be a revenue driver, but so far it has not been prioritized and not much money has been made from it.
Zuckerberg also stated that the period requires the company to get more done with fewer resources.