For years, even with concerns about privacy and content moderation in the background, Meta has managed to increase sales. But this amazing growth seems to be coming to an end.
In a grim second-quarter earnings report on Wednesday, the company formerly known as Facebook revealed that it both missed quarterly results. It reported earnings per share of $2.46; analysts expected $2.59. At the same time, it recorded a turnover of 28.82 billion dollars against 28.94 billion dollars expected by analysts.
Meta also delivered a sobering outlook for its next quarter, anticipating further easing in the advertising market, from which the company derives nearly all of its revenue. Meta expects revenue of between $26 billion and $28.5 billion for the third quarter, a notable drop from analysts’ expectations of $30.38 billion.
Wednesday’s news underscored what has become increasingly clear over the past several months: Against the backdrop of a weakened economy that could be heading into a recession, Meta is facing an inflection point in its product and his mission.
Investors have long braced for Meta’s advertising segment to weaken, largely due to Apple’s iOS privacy update. In 2021, Apple began requiring apps, including Facebook and Instagram, to ask users for permission before tracking their movements. Marketers also pulled back on advertising spend as they prepare for consumers to address economic concerns.
“Facebook’s dire quarter and weak outlook further underscores the view that advertisers have cut spending as the overall economy struggles with inflation, rising interest rates and changing shopping habits. consumption,” Jesse Cohen, senior analyst at Investing.com said in an email. .
Notably, Meta saw its first-ever quarterly year-over-year revenue decline since its market debut in 2012. Revenue was down 1% from the same quarter in 2021.
Meta shares, however, only dipped a few percentage points in after-hours trading.
Facebook and Instagram ads have always been popular with marketers due to Meta’s ability to target users. But the company’s ad unit has become less efficient due to privacy changes, which appears to be cutting costs.
“In Q2 2022, ad impressions served across our app family increased 15% year-over-year and average price per ad decreased 14% year-over-year. “, says the report on the results.
It’s not just Meta who has struggled this season. Companies that rely on ad spend, such as Snap and Twitter, reported low ad revenue, citing decreased spending by marketers due to economic uncertainty and changes to Apple.
The poor revenue results come following Meta’s announcement that it plans to insert more TikTok-like short-form videos into users’ feeds. Meta CEO Mark Zuckerberg went on the defensive early in the call with analysts:
“I want to make it clear that we are still ultimately a social enterprise,” Zuckerberg said in a call with analysts. Zuckerberg said Meta hopes suggesting more content from people users don’t know (like short videos) will inspire more engagement among friends and family, and, in turn, more video views. He said a “flying effect” would develop.