Meta results fall for the first time since 2012

Meta has invested a huge amount of money in creating its metaverse. Unfortunately for the company, Reality Labs, the unit dedicated to virtual and augmented reality, continues to lose money. The company announced a quarterly loss of 2.81 billion.

Meta stock will drop 50% in 2022

Meta, the parent company of Facebook, WhatsApp, Instagram and Messenger, has just published its financial results for the second quarter of 2022. For the first time, the social media giant registered a decrease in its revenue. Neither the Cambridge Analytica scandal in 2018 nor the slowdown in the advertising market at the start of the Covid-19 pandemic had put him in this position.

The California-based group faced a decline in revenue for the first time since going public in 2012. Its quarterly revenue was $28.8 billion, down 1% from a year earlier. In the US market (-4%), and especially in Europe (-12%), the company experienced a more significant decline, affected by the strengthening of the dollar against the euro and a decrease in daily Facebook users (-4 million) .

For a group accustomed to staggering double-digit growth, this is exceptional, to say the least. Net income was $6.6 billion, down 35%.

“It appears that we have entered a phase of economic slowdown that will have a major impact on the digital advertising sector, its CEO Mark Zuckerberg acknowledged after the publication of the results. It is always difficult to predict the depth or duration of these cycles.”

In conclusion, Meta is going through a period of unprecedented turmoil even as it changes its strategic model. “We’re going to have to do more with fewer resources,” said CEO and founder Mark Zuckerberg. Following the announcements, the share price fell 5% in after-hours trading. Overall, Meta stock is down 49.91% since the start of the year.

Different explanations for this fall

While Meta derives more than 97% of its revenue from online advertising, the state of the advertising market has caused this situation. Companies are limiting spending as a precaution, and ads are one of the hardest hit categories. The average price per ad fell 14%, and although the company saw 47% growth last year, compared to the previous year, companies such as Google, Twitter and Snap cited the difficult economic climate as a reason for their poor results.

Although the advertising market is going through a tough time, Meta’s biggest challenge is the TikTok video app. Mark Zuckerberg even admitted it himself. The application is growing very quickly and is attracting the attention of many users, especially young people. Instagram and Facebook (to a lesser extent) both struggle to capture the attention of these users.

Meta is struggling because its ad revenue base is too chaotic. They had to lower their hiring expectations, like the entire tech industry, and tried to reorient their business to the metaverse. Although Reality Labs earned $452 million in revenue, Facebook’s metaverse division lost $2.8 billion in the second quarter.

Reality Labs’ disastrous financial results come just days after a survey questioned consumer interest in virtual worlds. According to the study, consumer expectations are at odds with the way virtual worlds are designed.

Despite these setbacks, Mark Zuckerberg remains determined to continue the development of the digital world in virtual and augmented reality. The future will tell us whether he was right or wrong.

Leave a Comment