For the first time ever, Meta − Facebook’s parent company − recorded a decline in revenue, while profit continued to diminish for the third consecutive quarter.
Meta released second quarter 2022 (Q2) earnings results for its platforms yesterday, painting a gloomy picture for the social media group due to increased competition and a decline in digital advertising.
In the period, the company says it experienced a reduction in advertiser demand, and it was also impacted by the mix shift in ad impressions towards lower monetising surfaces.
Meta’s revenue dropped 1% to $28.8 billion in the quarter, while profit was down 36% to $6.7 billion.
The company’s Q2 total expenses were $20.5 billion, up 22% compared to last year, and operating income was $8.4 billion, which Meta says represents a 29% operating margin.
Speaking to analysts, Mark Zuckerberg, Meta founder and CEO, said despite the weak quarter, Meta’s family of apps continues to grow and the company now reaches more than 3.6 billion people monthly across its services.
However, Zuckerberg cautioned the group will be scaling back on some projects and there will also be redundancies.
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. It's always hard to predict how deep or how long these cycles will be, but I'd say the situation seems worse than it did a quarter ago.
“In this environment, we're focused on making the long-term investments that will position us to be stronger coming out of this downturn − including our work on our discovery engine and Reels, our new ads infrastructure and the metaverse. We're also focused on being rigorous about measuring returns.”
Zuckerberg noted that given the more recent revenue trajectory Meta is seeing, the company will be slowing the pace on some investments.
“Given the continued trends, this is even more of a focus now than it was last quarter. Our plan is to steadily reduce headcount growth over the next year. Many teams are going to shrink so we can shift energy to other areas, and I wanted to give our leaders the ability to decide within their teams where to double down, where to backfill attrition, and where to restructure teams while minimising thrash to the long-term initiatives.
“The fact that we hired a lot of people earlier this year means our reported year-over-year headcount growth will still be substantial for the next few quarters, but it should continue to decline over time. This is a period that demands more intensity, and I expect us to get more done with fewer resources,” said Zuckerberg.
“Many of the macro factors having an impact on our revenue are continuations of things we’ve seen in previous quarters, such as the continued impact of the war in Ukraine and the normalisation of e-commerce after the pandemic peak,” commented COO Sheryl Sandberg.
“But there are also new challenges with rising inflation and uncertainty around a looming recession. We know that recessions put pressure on marketers to make sure their ad budgets are spent in the smartest way possible.
“We’re focused on helping them run efficient marketing campaigns that get the best possible return on investment, including helping them shift their ad strategies on our platform in line with user trends.
“In the short- and medium-term, we’re working to improve and evolve our ads solutions. We’re helping advertisers improve the performance of their ads by growing onsite data conversions with products like Lead ads, which make it easier for businesses to generate leads, and with business messaging products like Click-to-Message ads, where you click on an ad in your Facebook or Instagram feed and it opens a chat with the business in Messenger, Instagram or WhatsApp,” explained Sandberg.
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