Meta’s falling revenue doesn’t bode well for the social network
For the first time in its history, Meta has recorded a drop in sales. This worrying trend for the social network is likely to continue for a long time.
It’s a cold shower: For the first time in its history, the results of Meta, Facebook’s parent company, are in the red. The company reported second-quarter 2022 results on July 27 and said its revenue for the period of $28.8 billion declined 1% from 2021.
Mark Zuckerberg’s company is going through an extremely difficult time in the context of a global recession and while Frances Haugen’s revelations in the Facebook files in late 2021 dealt another blow to its reputation. But the worst could be yet to come for Meta.
billions of dollars in losses
Meta’s revenue isn’t the only red indicator: The company also saw net income decline 36% to $6.7 billion. Reality Labs, which makes the company’s virtual reality headsets and is responsible for developing the metaverse, also reported a $2.8 billion loss in the quarter.
These poor results were to be expected. ” They reflect the weak advertising demand that we experienced in the second quarter said the group’s finance director in the press release. ” We also expect Reality Labs’ results to be even weaker in the next quarter. ‘ is stated.
The magnitude of Meta’s losses and the bleak future prospects are two very worrying factors for the group. The chief financial officer even announced that in anticipation of a ” difficult economic environment ‘, recruitment within meta has been reduced. The only good news the group can keep from this quarter is the increase in the number of users of its services. While Facebook announced in February that it had lost some of its users, the trend appears to have reversed, with the number of daily Facebook users increasing 3% to 1.97 billion.
The hardest part is probably yet to come
But this good news will probably not be enough to save the group, which has to face several challenges. The first concerns its revenue, which has been hit hard by Apple’s app-tracking transparency mechanism, which allows iPhone owners to restrict application tracking — and therefore advertising tracking by advertisers. The Verge estimates the social network lost $10 billion as a result of this move.
Another black spot: The Metaverse, on which a large part of Mark Zuckerberg’s ambitions now rest, is not yet finished. Aside from reality labs piling up the losses, the group calculated that the stretch would not be profitable until at least the end of the decade. So long-term losses are still to be expected before Meta can hope for any wins – if there are any at all.
Finally, the big threat on Facebook and Instagram is TikTok, which is taking more and more market share away from younger users. In response, Meta made the decision to make Instagram an increasingly video- and recommendation-centric network, and attempted to create its own algorithm to compete with TikTok’s. The measure is only dividing, and some of the social network’s biggest stars, Kim Kardashian and Kylie Jenner, have openly criticized it.
To meet all these challenges, Mark Zuckerberg has not yet presented a new business plan or announced a major realignment. He, on the other hand, kindly asked his less motivated employees to resign because ” There’s probably a lot of people in the business who shouldn’t be here ‘ he said at a meeting. I’m not sure that putting more pressure on the shoulders of the meta staff is the best answer to all of these problems – but at least things are clear.