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With revenue of $28.8 billion, Meta continued in the second quarter one percent lower than last year’s result (29.07 billion) and also just missed Wall Street analyst estimates (28.9 billion). Net profit fell 36 percent to $6.7 billion (analysts estimate: $7.04 billion). The outlook for the third financial quarter that has just started was also bleak. Founder and CEO Mark Zuckerberg spoke of an economic downturn that is having a huge impact on the digital advertising industry. The situation now looks even more bleak than it did three months ago.
Alphabet, Twitter and Snap also reported declining momentum in the advertising market in recent days. In any case, unlike its rivals, parent company Google was able to deliver: the internet giant generated nearly $41 billion in search engine advertising revenue in the past quarter. The travel and retail industries, in particular, had placed ads and helped Google achieve 13 percent growth in this segment. The advertising revenue of the video streaming portal YouTube also increased, albeit by just over four percent.
Comforting Meta: The key figure of daily active users on all three platforms Facebook, Instagram and WhatsApp remained stable at 2.88 billion users, market observers had predicted a decline. However, the advertising industry is likely to continue to weaken: according to Meta, what is particularly painful is the global slump in online commerce, which reached its all-time high during the peak phase of the pandemic, and internet services are experiencing a particular boom in advertising.
Zuckerberg had already responded to the economic downturn, announcing boldly that he wants to “achieve more with fewer resources” in the future. The company now wants to identify and kick out “low performers” — not an uncommon practice in the US. As Business Insider ReportsMeta-employees expect that the workforce can be thinned by ten percent.
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But Meta has more problems than just declining ad revenue. In the past year, Apple new privacy settings introduced, which empower consumers and prevent Facebook, Snap, Google & Co. display ads optimally on iPhones and iPads and measure success. Since Meta generates the largest ad revenue on mobile devices, this was a real slap in the face.
Equally serious is the success of Chinese rival TikTok, which not only robs Meta of tons of advertising dollars, but also forces the company to rebuild Instagram and Facebook in a way that the services mimic TikTok. This is what the Instagram product looks like reels the rival from the Far East like one egg in another. Now Zuckerberg is hoping for more ad revenue here.
They’re also necessary because, according to observers, reels could disrupt Instagram’s classic advertising business — a cannibalization effect for which the company has yet to find answers. In addition Many users don’t find Instagram’s approach to the Chinese rival funny at allthey want to keep their network as it was.
Parallel to these challenges Zuckerberg invests many billions, to rebuild his empire and carry out the idea of the Metaverse. The company expects very expensive conversion work here for years to come. Not all investors are convincedthat really carries the idea. The fact that Meta has now made the tickets for its Metaverse more expensive doesn’t necessarily help the service: the hardware division Meta Reality Labs has the price for the virtual reality headset Quest 2 increased by $100 – without adding any new features.
There are also adjustments in management in view of the many challenges. The previous Chief Financial Officer (CFO) David Wehner has been promoted to the new Chief Strategy Officer. He will be succeeded in the role of Chief Financial Officer by Susan Li, who was previously Vice President of Finance. Zuckerberg justified Wehner’s appointment in a statement on Facebook, stating that a “more disciplined strategy process” is needed, which would benefit the internal organization as well as partner relationships.
Top manager Sheryl Sandberg, who will leave in the autumn, also made a final appearance to announce the quarterly figures. In her role as Chief Operating Officer (COO), she said: “There is no doubt that we are undergoing a transformation – and this at a time of global economic uncertainty.” However, Meta is a company with enormous resilience, it has been proven several times that it is possible to develop products that are scalable worldwide. (ss)