In its Q2 earnings call, Meta reported the first-ever yearly decline in Facebook’s revenue. The revenue of the social network service dropped by 1% to $28.8 billion in Q2. Additionally, Meta claimed that Facebook’s revenue might drop even more in Q3.
Furthermore, Meta’s overall profit decreased by 36% to $6.7 billion. Interestingly, the Relatiy Labs division in charge of developing metaverse lost around $2.8 billion in Q2.
Facebook’s revenue drop
Wall Street expected Facebook’s revenue to plummet for the first time in the last quarter. Nonetheless, it shows the many challenges Meta is facing on all fronts. In addition, Apple’s “Ask app not to track” feature on iPhones made its ads less effective. As a result, Meta lost $10 billion in ad revenue in 2021 alone. And now, unfortunately, the rapidly declining economy prompted advertisers to pull back on spending.
On the other hand, Meta is “rearchitecting” Facebook’s and Instagram’s feeds to compete with TikTok. Zuckerberg recently revealed that the platforms would increase the recommended content from accounts users don’t follow next year. However, he said that building the AI needed for this strategy is a costly investment.
However, despite declining revenue, Meta boosted Facebook’s daily users by 3% to 1.97 billion. In addition, the company revealed that a total of 2.28 billion users use its social media apps – Facebook, Instagram, Messenger, and WhatsApp. The feat is commendable as it’s a 4% increase from last year.
Zuckerberg noted that the rise in daily Facebook users is primarily due to the increased consumption of videos. In addition, he revealed that Reels (short-form videos) are monetizing faster than Stories ever did. Meta claims that Reels be a “revenue driver” in the long run. However, for now, the company isn’t making much money from Reels.
Finally, Zuckerberg said, “This is a period that demands more intensity, and I expect us to get more done with fewer resources. I think we’re going to come through this period as a stronger and more disciplined organization.” Let’s hope he is right!