Facebook Chief Executive Mark Zuckerberg announces the rebrand of Meta. Photo / Getty Images
Meta, the parent company of Facebook and Instagram, reported its first revenue decline in history after warning that Apple’s privacy change would lead to a staggering $10 billion in lost sales this year.
Meta also struggled with growing competition from rival TikTok, while its CEO warned that headcount would be reduced.
Apple’s move, which allowed people to “ask the app not to track” with a single click, appears to have torpedoed Facebook’s advertising model, which combined data from different companies to personalize ads.
One Twitter user said it was “hilarious” that a “seemingly innocuous iOS update – allowing users to single-click to enter or exit data collection/tracking/analysis by apps – torpedoed A$16.31 billion alone. [US$10b] and counting on Facebook ad revenue”.
Meta CEO Mark Zuckerberg revealed that job cuts would be made at the social media giant.
“A lot of teams are going to shrink so we can transfer power to other areas within the company,” he said on an earnings call on Wednesday.
In May, the company had implemented a partial hiring freeze, while recently Meta’s head of HR, Lori Goler, suggested it would cut employees who didn’t meet expectations as the company began operating at “increased intensity”, one said. memo.
In June, an internal memo from Meta’s head of engineering told his managers to identify and report underperformers so they could force those employees out, the Wall Street Journal reported.
Meanwhile, the company posted profits of $6.6 billion, down 36% compared to the same period last year, when it made $10.3 billion.
When it comes to revenue, it earned $28.8 billion, which is down 1% compared to the previous year when it was $29 billion.
“The year-over-year drop in quarterly revenue signifies how quickly Meta’s business deteriorated,” said Insider Intelligence analyst Debra Aho Williamson, reported the Sydney Morning Herald.
“Prior to these results, we predicted that Meta’s worldwide ad revenue would increase by 12.4% this year to nearly $130 billion. Now, it is unlikely to reach that number.”
In addition to the TikTok problem, Meta has also suffered from Apple’s privacy changes, which allow users to stop Facebook and Instagram tracking, “questions about Meta’s leadership,” and negative feelings about the company as users grow older. whistleblowers come forward, according to Raj Shah, managing partner at US digital consultancy Publicis Sapient.
When news of Chief Operating Officer Sheryl Sandberg’s departure from the company, after 14 years working alongside Zuckerberg, broke in June, it couldn’t have come at a “worst time” for Meta, analysts said.
Sandberg, who has a net worth of $1.6 billion, was the brains of the company’s massive advertising business.
But his departure also comes at a time when Meta is trying a risky move, investing billions to launch a suite of VR metaverse products that would take years to turn a profit, analysts say.
“Expect the decline of Meta to continue until Meta can monetize the metaverse and start another Meta-reverse,” Shah added.
Meta’s chief financial officer, David Wehner, blamed the company’s results for continued weak demand for advertising, which he said was being driven by broader macroeconomic uncertainty.
However, the company defied expert predictions when it revealed that Facebook’s daily user base had increased to 1.97 billion people, up from 1.96 billion just three months ago.
TikTok is a big concern as it involves a younger demographic.
Sabri Suby, founder of Australian digital marketing agency King Kong, said TikTok is one of the few big threats to Facebook since it launched 18 years ago.
“Facebook’s usual reaction would be to just buy the offending platform, but with TikTok, that’s not possible. But this isn’t Zuckerberg’s first rodeo, he’s weathered the worst,” he said.
“Facebook’s ongoing attempts to retain their younger audience have been a challenge, and they are terrified of disappearing with their older audience, but they still have a very valuable place in the market.
“Not only is TikTok’s algorithm more advanced, but the potential to rival Facebook’s ad platform is the elephant in the room. The costs of running Facebook ads are going up and the quality is going down.
“The platform is saturated and complex by censorship and millions of companies vying for the same space, but the numbers released today are not necessarily a sign of the platform’s imminent and pending destruction.”
Zuckerberg said in April that the company would change how users view content in a bid to increase engagement, but the changes have caused a backlash among users.
The company said it would recommend content to Facebook and Instagram users from across the social network rather than just directly from the accounts they follow, mimicking one of TikTok’s subscription features as well as showing more videos.
The changes prompted a petition and an image that reads “Make Instagram Instagram Again” and “stop trying to be tiktok” circulating across the platform, which was shared by Kim Kardashian and Kylie Jenner garnering millions of likes.
Meta’s head of Instagram, Adam Mosseri, said many of the features are still evolving.
“I have to be honest – I believe that more and more Instagram will become video over time,” Mosseri said in a video posted to Twitter.
Suby said Facebook and Instagram will continue to emulate rivals with more video content and updates.
“It is yet to be determined whether or not they will survive this threat, but there are definitely things, like customer service, that they urgently need to address,” he said.
“Facebook gets boring when it comes to customer support when compared to TikTok and Google where you can speak directly to a rep for support – this is almost non-existent for Facebook and something the ‘like it or crush it’ ethos has satisfied so far – this will no longer work.”
Meta revealed that it also expects its total expenses for 2022 to be between $85 billion and $88 billion, down from the company’s previous forecast of $87 billion to $92 billion.
A reduction in hiring and overall expense growth plan was the reason for the drop, the company said.
Meta shares took a hit when the company’s performance was announced, falling 3.3% to $163 in after-hours trading.
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