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Meta, the parent company of Facebook and Instagram was hit hard by a reduction in advertising revenues in the three months leading up to July, which resulted in the company’s first-ever year-over-year revenue decline.
Although Meta’s overall sales dropped 1% to $28.8 billion (£23.7 billion), the business managed to fend off a reduction in users.
After years of significant gains, analysts worry that the company’s growth may have peaked.
While more businesses are vying for advertising dollars, competitors like TikTok have diminished its popularity.
Meta, which typically controls more than 20% of the global ad market, warned investors that ad sales were likely to decline once more in the months to come as e-commerce spending declines from its pandemic boom and businesses become more cautious with their spending due to concerns about inflation and the conflict in Ukraine.
In response to the downturn and the company’s plans to redirect investment into new areas, including its virtual reality platform, Horizon, in a wager that the so-called metaverse is its best prospect for growth, Meta boss Mark Zuckerberg said the company would reduce its hiring “steadily” over the next year.
The Federal Trade Commission, the nation’s consumer protection agency, said it would file a lawsuit to stop Meta’s acquisition of the virtual reality fitness startup Within Unlimited, which is the owner of the program Supernatural, due to monopolistic concerns.
According to Angelo Zino, senior equities analyst at CFRA Research, the success of those ambitions is still years away because of Meta’s difficulty in growing its user base. He claimed that the company is now one with little to no growth.
As a result, the company—which also owns WhatsApp—recently changed its algorithms on Instagram and Facebook so that they behave more like TikTok, suggesting postings to users from accounts other than the ones they already follow.
Users have expressed outrage over the actions, perhaps most notably celebrity Kylie Jenner, who this week tweeted a message with her more than 360 million Instagram followers saying, “Make Instagram once more Instagram. (Quit attempting to be Tiktok) I want to look at my friends’ adorable pictures.) sincere thanks to all “.
According to the firm, 2.88 billion people use one of its applications daily, up from 2.87 billion in March, and 1.97 billion individuals log into Facebook on average every day, up from 1.96 billion in March.
Although Mr. Zuckerberg expressed satisfaction with indicators that users were spending more time on the company’s apps, revenues for the quarter still fell by 36% to $6.7 billion.
He declared that although at a slower rate than anticipated, the company would continue to invest.
Difficult conditions for Meta and other tech giants
Meta is not the only corporation dealing with difficulties; Sheryl Sandberg, it’s vice president of strategy, declared her intention to quit the company in June.
With officials frequently telling investors that the company was experiencing the impact of economic “uncertainty,” Alphabet, the parent company of Google and YouTube, this week posted its weakest revenue growth since the pandemic hit in 2020.
In addition to reporting an extraordinary decline in sales, Twitter and Snap both issued “extremely tough” warnings following their weakest quarterly results, which caused a 25% decline in share price.
According to Nikhil Lai, senior analyst for performance marketing at Forrester Research, Meta is particularly vulnerable to any market slowdown due to its reliance on small and medium-sized enterprises, which are “spooked” about the economy.
When Apple updated its privacy settings last year, it also disturbed the company’s carefully honed mechanism for targeting advertisements.
Opinions expressed by California Gazette contributors are their own.