The owner of Facebook and Instagram saw a drop in advertising sales in the three months to July, resulting in the company’s first year-on-year revenue reduction. Meta’s total revenue fell 1% to $28.8 billion (£23.7 billion), although the company avoided a drop in users.
Analysts believe the company’s growth has peaked following years of significant gains. TikTok and other competitors have reduced its appeal, and more corporations are competing for ad expenditure.
Meta, which generally controls more than 2 per cent of the global ad industry, cautioned investors that ad sales were likely to dip again in the coming months as e-commerce spending slowed after a flu surge and corporations concerned about inflation and the Ukraine war spent more cautiously.
In reaction to the slowdown and the company’s plans to transfer investment into new areas, including its virtual reality platform, Horizon, in a wager that the so-called metaverse is its best hope for growth, Meta CEO Mark Zuckerberg said the company would reduce hiring “steadily” over the next year.
Regulators, notably the Federal Trade Commission, America’s consumer watchdog, have expressed alarm over Meta’s acquisition of the virtual reality fitness business Within Unlimited, which owns the app Supernatural, citing monopoly concerns.
According to Angelo Zino, senior equities analyst at CFRA Research, the payback from such ambitions is years away, with Meta’s difficulty to increase its users a hint of restricted growth in the years ahead.
“Essentially it’s now become a low-to no-growth company,” he said.
Facebook revealed its first ever loss in daily users earlier this year.
In response, the firm, which also owns WhatsApp, recently changed its algorithms on Instagram and Facebook to behave more like TikTok, promoting postings to users from accounts other than those they follow.
The alterations have sparked outrage among users, perhaps most notably celebrity Kylie Jenner, who uploaded a photo with her more than 360 million Instagram followers this week saying “Make Instagram Instagram once more. (Stop attempting to be Tiktok. I just want to look at lovely pictures of my buddies.) Regards, everyone “.
In June, Facebook reported that 1.97 billion individuals logged in on average each day, up from 1.96 billion in March, and 2.88 billion used one of its apps on a daily basis, up from 2.87 billion in March.
Zuckerberg expressed satisfaction that consumers were spending more time on the company’s programmes, although profits fell 36% to $6.7 billion in the quarter. He stated that the company would continue to invest, albeit at a slower rate than previously envisaged.
“We face a number of challenges in the near term, but the investments we’re making should give us…advantage over the long term,” he added.
Meta, whose number two in command Sheryl Sandberg in June announced plans to leave the company, is not the only firm facing challenges.
Alphabet, the parent company of Google and YouTube, this week reported its slowest revenue growth since the pandemic hit in 2020, with executives repeatedly warning investors that the firm was feeling the impact of economic “uncertainty”.
Twitter also reported an unusual fall in revenue, while Snap warned of “incredibly challenging” conditions after its weakest quarter ever, sending shares plunging 25%.
“When you look at the ad space right now…growth is deteriorating at a very fast pace, much faster than most people had anticipated,” Zino said.
Meta’s reliance on small and medium-sized businesses – which are “spooked” about the economy – makes it particularly vulnerable to any market slowdown, said Nikhil Lai senior analyst for performance marketing at Forrester Research.
The company’s fine-tuned model for targeting adverts was also disrupted last year when Apple overhauled its privacy settings.
(Adapted from Independent.co.uk)