Facebook Reports a Drop in Revenue for the First Time Ever

Facebook’s parent company Meta reported Wednesday a revenue decline for the first time since its inception. This was due to a drop in ad sales amid economic worries. The social media giant did not meet earnings expectations for the second quarter.

Meta informed their revenue of $28.8 billion in the April-June quarter. This decreased by 1% over the same period in last years. Meta earned $2.46 per share, which was expected of $2.56 per share. Analysts surveyed by Thomson Reuters were disappointed that the company’s performance was not as good as expected.

Meta’s drop first-ever revenue highlights the difficulties the social media giant’s advertising business facing economic slowdown. As the global economy is in recession, advertisers are pulling back. The strength of the dollar affects overseas revenue. Marketers are now questioning the effectiveness of advertising because Apple allows users to opt out of tracking.

Meta has cut costs and frozen some employees to help offset revenue challenges. Analysts were less optimistic about the company’s third quarter. Meta stated that it anticipates revenue in between $26 billion and $28.5 billion. This is lower than the $30.5 billion forecast.

Meta CEO Mark Zuckerberg stated that the company appears to be in an economic downturn, which will have a wide impact on digital advertising. He spoke with analysts during a conference call. It’s difficult to predict the depth and duration of these cycles, but it seems that the situation is worse than it was a quarter ago.

As Meta continues to invest in its vision for the metaverse (virtual spaces where people can socialize, work, and play), this slowdown in advertising comes. However, investing in products like virtual reality headsets or video chat devices is not cheap. In the second quarter, $2.8 billion was lost by the metaverse business of tech giant CNET. The company announced Tuesday that it would raise the price for its Quest 2 headsets to $100 in August.

The company is also facing increased competition from other apps like short-form video platform TikTok or photo-sharing app BeReal. Meta still earns most of its revenue by selling ads on Facebook, Instagram, and its photo-and video-sharing app Instagram.

Some users are upset that Instagram and Facebook have changed to compete against TikTok. Instagram is currently testing a full-screen feed that looks more like TikTok. Kylie Jenner and Kim Kardashian posted a meme Monday urging Instagram to stop trying to imitate TikTok and instead focus on photo sharing. In a Tuesday tweet, Adam Mosseri, Instagram CEO, stated that while the platform will continue supporting photo sharing, he believes the app will become more popular with more videos.

Zuckerberg stated that the company focuses on connecting people with their friends and families. Zuckerberg said that social media users are finding interesting content in their feeds, and then communicating this content to friends.

He said, “This creates a flywheel of discovery and social connection, and inspires people to create more content.” According to the company, it has seen more than 30% growth in time spent engaging with short-form video features Reels on Facebook and Instagram.

In the 2nd quarter of 2018, 2.88 Bn people used Meta’s apps like Instagram or WhatsApp daily. This is a 44% increase over the previous year.

Additionally, the company is making additional leadership changes. David Wehner, Meta’s chief financial officers, will assume a new role of Meta’s first chief strategist officer. He will oversee the company’s corporate strategy and development. Susan Li, the company’s vice president for finance, will be promoted to CFO. Sheryl Sandberg announced her resignation in June as chief operating officer. She had her last earnings call Wednesday. She will continue to serve on the company’s board.