Facebook Group halts revenue decline – but problem remains

Last year, the Facebook group Meta came under pressure: declining revenues, billions in costs for Mark Zuckerberg’s dream of the Metaverse, competition from Tiktok. But now sales are increasing again and the own Tiktok replica is also bearing fruit.

After nine months of decline, the Facebook group Meta is on the rise again. In the past quarter, sales increased by three percent, while analysts had expected a decrease. Meta also expects a plus for the current quarter. Founder and boss Mark Zuckerberg sees software with artificial intelligence as a growth engine. At the same time, its vision of the future of virtual worlds continues to devour billions – but it remains a niche business that has recently shrunk.

Amid the chatbot ChatGPT hype, no tech company can do without mentioning artificial intelligence when presenting its quarterly results – and Meta was no exception. Zuckerberg on Wednesday announced conversations with software on Meta’s chat services WhatsApp and Messenger, as well as AI tools for generating images on Facebook and Instagram. Artificial intelligence will affect all of the group’s apps and services.

Continued focus on Metaverse

At the same time, Zuckerberg emphasized that this does not mean that he deviates from his vision of the so-called Metaverse, a digital world as a future online platform. Zuckerberg aligned the company to this in 2021 — and also changed the company name from Facebook to Meta to underline the new focus. Investors have expressed concern about the high spending on Metaverse development, while Zuckerberg defends it as an investment in the future.

In the Reality Labs division, which develops digital worlds and special glasses for virtual reality, the operating loss amounted to almost $4 billion, compared to $2.96 billion a year earlier. The increase is mainly due to personnel costs and severance payments for layoffs, according to CFO Susan Li. For the current year, Meta expects further increasing losses at Reality Labs.

The division brought in just $339 million in revenue last quarter. The reason for the sharp drop compared to the turnover of $ 695 million a year earlier was the disappointing sales of the VR glasses Quest 2, according to Li. The app business generated $ 28.3 billion during this period and generated an operating profit of $11.2 billion. billion dollars.

Respond successfully to competition

Meta has also felt competition in recent months from the video app Tiktok, which is especially popular with young users and attracts increasing amounts of advertising money. Meta countered this with the short video format Reels, where the clips are recommended for software users just like Tiktok. As a result, the time users spend on Instagram has increased by 24 percent, Zuckerberg said.

That’s not good news for Meta’s revenue, as advertising in Reels is cheaper than other formats like news feeds and stories. The popularity of Reels Meta costs money. That won’t change until late this year or early 2024, Li said. Consolidated sales rose to $28.6 billion in the past quarter.

turbulent times

In the months leading up to this, Meta suffered from an overall drop in online ad spending and issues with ad models following Apple’s privacy enforcement efforts on the iPhone. However, in the last quarter of 2022, the Facebook group beat analysts’ forecasts, despite a renewed decline in revenue. The stock rose more than 11 percent in aftermarket trading on Wednesday.

Meanwhile, quarterly profit fell 24 percent to $5.7 billion (5.08 billion Swiss francs), as Meta announced after the US stock market closed. The group has recently begun its second round of layoffs following a significant job increase during the pandemic. More than 20,000 jobs should be cut in May.

The group is concerned about the uncertainty surrounding data transmission from the European Union to the US. The process for a new legal framework is currently underway after the previous model “Privacy Shield” was overturned by the European Court of Justice. Facebook generates about 10 percent of its ad revenue from advertising in EU countries, Li said.

Meta has a huge reach among online platforms and is still growing. The number of daily active Facebook users reached 2.04 billion, up from 2 billion three months earlier. 3.02 billion users access at least one of the group’s apps every day. At the end of 2022, this was still 2.96 billion. Meta also includes Instagram and the chat services WhatsApp and Messenger. Monthly, 3.81 billion users were active in at least one meta-app. (sda/dpa)