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Meta parent Facebook suffered a double whammy in the past three months: Revenue fell for the first time in history and profits fell for the third consecutive quarter, amid increased competition from TikTok and nervousness from advertisers.
CEO Mark Zuckerberg told investors on a conference call: “It looks like we’ve entered an economic downturn that will have a massive impact on the digital ad business.” I can say that the situation looks worse than a quarter ago.
Meta is cutting costs and slowing its hiring pace to weather the storm, he said.
“This is a period of increased intensity and I expect we will be able to do more with fewer resources,” he said.
Shares of Meta fell after the news, adding to a decline that has nearly halved the company’s market value since Facebook first reported a decline in daily users at the end of last year.
Revenue in the quarter ended in June fell 1 percent from a year earlier to $28.8 billion, a bigger drop than Wall Street analysts had expected. Meta said the strengthening dollar was a factor in the decline in revenue, without which it would have reported a 3 percent increase.
The company’s forecast for sales in the current quarter, between 26 and 28.5 billion dollars, was also lower than analysts’ estimates.
Profit fell 36 percent to $6.7 billion.
However, there was one silver lining in Meta’s quarterly report: People are still using Facebook. The number of daily logins to the flagship social network rose 3 percent to 1.97 billion, defying Wall Street’s expectations for another decline.
Meta’s results are the latest sign of a prolonged slowdown in the digital advertising market, as businesses pull back on spending amid rising inflation, rising interest rates and other economic headwinds. The company blamed its weak third-quarter forecast on “weak advertising demand” due to macroeconomic uncertainty.
Social media companies are still grappling with the impact of Apple’s privacy changes, which have made it harder to target ads to smartphone users based on their online activity.
Investors It has been cut Tens of billions of dollars were wiped off the market value of ad tech companies after Snapchat and Twitter posted disappointing results last week.
Snapchat reported its weakest quarterly growth rate — even worse than the company had warned in May — and said the situation was too uncertain to provide a financial forecast for the coming months.
Twitter’s revenue unexpectedly fell, which the company blamed on nervous advertisers and its high-margin deal to sell the company to Elon Musk.
On Tuesday, Google reported its lowest quarterly growth rate since the early days of the pandemic.
Faced with increasing competition for shrinking ad dollars, Meta is trying to build an ambitious pivot. It’s remaking Facebook and Instagram to look and work like TikTok, the Chinese company popular with younger users, by filling users’ feeds with short videos from influencers and random strangers.
Zuckerberg said on Wednesday’s earnings call that Meta’s efforts are driving engagement, calling out Reels, the company’s short-form TikTok video format, and its investment in artificial intelligence technology that recommends content in its apps and helps advertisers target messages. .
About 15 percent of the posts that show up in users’ Facebook and Instagram feeds are now from accounts they don’t follow but the company’s AI thinks they might like, Zuckerberg said. Meta plans to more than double this ratio by the end of 2023.
But the company faces an uphill battle: While users spend more time watching Reels, Meta doesn’t make as much money from ads on those videos as other formats.
Moreover, these changes have caused a strong reaction from some prominent users. Celebrities Kim Kardashian, Kylie Jenner And Chrissy Teigen Everyone this week complained about Instagram’s recent emphasis on video and the shift to mimicking TikTok.
On Tuesday, the head of Instagram Adam Mussery He addressed the criticism, admitting that some of the program’s changes “still aren’t good.”
But, he said, “I have to be honest. I believe that more and more Instagram will turn to video over time.”
He said the world was changing rapidly and the company had to change with it.
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