New York Facebook owner Meta has seen its first drop in revenue since its IPO in 2012. In the second quarter, revenues fell slightly by one percent to $ 28.8 billion, as the world’s largest social network announced on Wednesday after the US stock market closed.
The profit even fell by 36 percent to $ 6.6 billion. This is also related to the higher costs. Meta currently has around 83,500 employees, about a third more than a year ago.
Facebook Instagram, which includes services like Facebook, WhatsApp and Instagram, is also skeptical about the current quarter, leaving a wide range of $ 26.0 billion to $ 28.5 billion in revenue expectations. This means that a further decline is likely. In the third quarter of 2021, Meta had generated almost 28.3 billion dollars.
Meta recorded a slight growth in the number of users on its platforms. However, the Group could not translate this into higher revenues. This was also due to advertising restrictions due to new data protection requirements from Apple, which mainly affected iPhone users. “The entire industry is working constructively together to meet this challenge,” Meta explained in the teleconference in the evening.
“I’m trying to get the company to adapt to change faster,” said founder Mark Zuckerberg. “The market is very competitive. We are consistently working to improve ourselves further and further.” This has not changed since the time he was founded in his dorm room,” Zuckerberg said.
Worries about the stock market
The figures were poorly received on the stock exchange, the stock was down about four percent after the stock market. On Wall Street, there is concern about a further decline in tech values. Just last week, Snap and Twitter had presented alarming figures. On Tuesday evening, solid results at Microsoft and the counter-trend growing advertising business at Google had provided cautious relief in the tech market.
However, Meta is now reporting a decline. And as it became known on Wednesday, the group is also facing trouble with the antitrust authorities: US competition authorities are targeting the Group’s strong market position in the virtual reality (VR) business for the first time. The trade authority FTC went to court to prevent the purchase of a developer company by Meta.
“The setbacks for meta are not going away,” commented analyst Laura Hoy of financial house Hargreaves Lansdown. “The unimpressive results confirm the fears that advertising revenues are drying up.” Hoy saw “little reason for joy: declines and disappointments at every turn, including a gloomy outlook for the third quarter.“
Although the number of users of Meta’s app family has continued to grow, “albeit slowly, and the company is still debt-free. But other than that, the numbers were gloomy,“ the analyst said. The FTC’s efforts to prevent Meta’s planned acquisition of the VR company Within are “not only a nuisance for Zuckerberg’s vision of a digital future, but a shot in the face of the entire industry.“ Their large corporations, including Google, were striving for monopoly positions.
The Metaverse as a cost driver
According to Raj Shah of the consulting firm Publicis Sapient, five factors contributed to the decline in profits in the second quarter: competition from TikTok, reduced advertising spending in the economic downturn, Apple privacy changes, reputation problems and questions about the future of meta leadership.
In fact, a lot will change at the top of the group. Sheryl Sandberg, long the number two after Zuckerberg, will leave the company in September. CFO David Wehner will head the Group strategy in the future. The new chief financial officer will be Susan Li, previously the vice head of the finance department.
“Meta’s big bet on the Metaverse will continue to be a cost driver for years to come,” says consultant Shah. It is to be expected that the decline of Meta will continue until the group can monetize the metaverse. Digital advertising remains an undervalued growth market.
In 2021, Zuckerberg had set himself the goal of establishing a virtual world – the “metaverse” – as a network of various social Internet platforms, and changed the company name from Facebook to Meta. Since then, many industry observers have doubted the feasibility of the vision.
Controversial takeover plan
In the so-called virtual reality, users can immerse themselves in digital worlds with special glasses. Zuckerberg bet early on the business with the purchase of VR glasses pioneer Oculus in 2014. The company Within, which wants to buy Meta, is behind a VR fitness app called “Supernatural”. The FTC argues that Meta, with its “VR empire”, wants to occupy the new market by buying it up, instead of competing for it with its own offers.
The acquisition could lead to less competition and potentially higher prices, according to the lawsuit filed on Wednesday. “And Meta would be one step closer to the ultimate goal of owning the entire ‘metaverse’.” Meta already owns the VR app “Beat Saber”, which is designed for movement. The Group has acquired several VR specialists in recent years. According to a media report, Meta wants the purchase of Within, announced in the fall, to cost over $ 400 million.
Meta countered that the FTC lawsuit was based on “ideology and speculation” rather than facts. The idea that the takeover would be anti-competitive is “implausible,” a group spokesman told the technology blog The Verge.
Under its new BOSS, Lina Khan, the FTC is taking a tougher line against the big tech companies, which had long benefited from rather lax competition supervision in the USA. On Thursday, the tech giant Apple will present figures.