Facebook Parent Meta Reports First-Ever Revenue And Profit Drop (By 36 Percent)
Facebook's streak of 10 years of uninterrupted revenue growth has ended.
The social media platform reported its first-ever annual drop in revenue in the second quarter, with a decrease of 1 per cent to $28.8 billion.
The company also said that growth for the third quarter might drop even further. The total profit of the subsidiary, Meta, fell 36 per cent to $6.7 billion.
Its Reality Labs division, responsible for creating Mark Zuckerberg's metaverse visions, suffered a loss of $2.8 billion during the quarter.
Apple's "Ask for the app to not track" warning on iPhones has rendered its advertisements less effective, costing Meta $10 billion in ad revenue last year alone.
Now, a slowing economy has led advertisers to reduce spending. To take on TikTok, Meta is rearchitecting Facebook and Instagram to focus on short videos and posts it suggests to users.
In a conference call with analysts, Zuckerberg stated that the proportion of content people view on Facebook and Instagram from accounts they don't follow is expected to double by the end of the next year.
He added that making the AI required to achieve that is an expensive investment.
Zuckerberg told the media that Facebook had observed "engagement patterns" in the past that are "stronger than we expected" on Facebook due to the increase in the use of video.
He said Reels, the company's short-form video format aimed at TikTok, is monetizing faster than Stories after the company copied that format from Snapchat several years ago.
In the future, the company hopes for Reels to become an income generator; however, for now, the company is focusing on Reels but not making much revenue from the format.
"This is a time which needs more energy, and I'm expecting us to be able to do more with fewer funds," Zuckerberg said on the earnings call with analysts.