Facebook parent Meta reports first revenue decline

Meta has blamed macroeconomic pressures for its first year-on-year revenue decline and offered investors a gloomy outlook for the coming months as advertisers cut spending.

Meta, formerly known as Facebook, said on Wednesday that revenue for the April-June period was $28.82 billion, down 1% from the same period in 2021. Analysts had expected revenue of $28.92 billion , according to consensus data compiled by FactSet.

Speaking to investors, CEO Mark Zuckerberg painted a bleak picture for the rest of 2022. “It looks like we’ve entered an economic recession that will have a broad impact on the digital advertising business,” he said.

“And it’s always hard to predict the depth or length of these cycles. But I would say the situation looks worse than it did a quarter ago.”

As with several of his Big Tech peers, Meta said currency pressure had also weighed on his earnings, particularly the euro’s weakness against the dollar. Without currency headwinds, the company said, revenue would have risen 3% year over year.

The average price per ad fell 14 percent in the period compared to last year. Speaking to investors, outgoing COO Sheryl Sandberg said the company was still in the “early stages” of figuring out how to counter the impact of Apple’s recent privacy changes, which put more controls in place. strict about the amount of data collected about users for the good. ad targeting.

Meta’s results coincided with a trend of underperformance among the big players in online advertising, the business model that underpins much of the Internet economy.

Shares of Snapchat owner Snap plunged about 25 percent last week after its earnings missed analysts’ targets, saying advertisers were cutting budgets. Advertising revenue on Twitter fell 1% in the second quarter, when Wall Street was expecting 11% growth.

The biggest online ad player, Google parent Alphabet, blamed a cut in ad spending on Tuesday after revenue from its video-sharing site YouTube fell short of expectations. Alphabet’s global revenue is growing at its slowest pace in two years. However, the search group’s shares rose 8 percent on Wednesday, performing generally better than analysts had feared.

Meta’s net income fell to $6.69 billion from $10.39 billion last year. Wall Street had expected a profit of about $7 billion. Total costs and expenses increased by 22%. Despite announcing a hiring slowdown, headcount rose 32 percent year over year, and Zuckerberg said he would delegate downsizing decisions to individual team leaders.

The company said it expected revenue for the current quarter to come in between $26 billion and $28.5 billion, lower than the $30.4 billion analysts had expected, according to figures from S&P Capital IQ.

“This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is driven by broader macroeconomic uncertainty,” said CFO David Wehner.

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Meta shares were down about 3% in after-hours trading.

Zuckerberg used the earnings announcement to elaborate on the succession plan for Sandberg, who will leave the company this fall. Wehner, a 10-year Meta veteran, will fill a newly created position of chief strategy officer. Susan Li, who has been with the company for 14 years, will be promoted from vice president of finance to chief financial officer.

When Sandberg joined the company in 2008, its user base was approximately 100 million. Today, among Meta’s “family” of apps, which includes WhatsApp and Instagram, monthly active users are 3.65 billion, up 4% year-on-year. Daily active users stood at 2.88 billion.

Those numbers are being watched closely as the company struggles with recent changes to some of its products, particularly its efforts to push users to consume Reels, its new short-form video product designed to compete with the fast-growing TikTok.

Meta said Reels was running at a $1 billion annual revenue pace, but the transition has experienced considerable friction. The Instagram app recently changed to prioritize more video, often from accounts a user doesn’t follow or from advertisers.

On Wednesday, Zuckerberg indicated that the company would continue with this strategy in its applications.

“About 15 percent of the content on a person’s Facebook feed and slightly more than that on their Instagram feed is recommended by our AI,” he said. “We expect those numbers to double by the end of next year.”

Among the many critics of the change was celebrity Kim Kardashian, who posted a story on the platform urging the company to “make Instagram Instagram again.” With more than 320 million followers, Kardashian is one of the most prominent figures on the app.

Her dissent, which was echoed by her half-sister, Kylie Jenner, prompted a response from Adam Mosseri, chief executive of Instagram. He told users that he believed the video would become the focus of Instagram. “The world is changing rapidly and we will have to change along with it,” he said.

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