Meta’s business collapses as it moves away from social networking

Over the years, even with concerns over privacy and content moderation in the background, Meta has managed to increase its sales. But this astonishing growth seems to be coming to an end.

in a serious second quarter earnings report On Wednesday, the company formerly known as Facebook revealed that it missed both the top and bottom lines for the quarter. It reported earnings per share of $2.46; Analysts were expecting $2.59. At the same time it posted revenue of $28.82 billion, better than analysts’ expectation of $28.94 billion.

Meta also gave a grim outlook for its next quarter, anticipating a further softening in the advertising market, from which the company draws nearly all of its revenue. Meta expects third-quarter revenue to be between $26 billion and $28.5 billion — a marked drop from analysts’ expectations of $30.38 billion.

Wednesday’s news underscored what has become increasingly clear over the past few months: Against the backdrop of a weakening economy that could be headed for a recession, Meta is facing an inflection point in its product and mission.

Due in large part to Apple’s iOS privacy update, investors have long been prepared to sabotage Meta’s advertising segment. In 2021 Apple began requiring apps, including Facebook and Instagram, to ask permission before users could track their activities. Marketers are also pulling in some advertising spend as they prepare consumers to respond to economic concerns.

Jesse Cohen, senior analyst at Investing.com, said in an email, “Facebook’s terrible quarter and weak outlook further underscore the idea that advertisers are cutting spending as the overall economy continues to grow with inflation, higher interest rates and changes in consumer patterns.” Struggling with.” ,

Notably, Meta reported its first year-over-quarter revenue decline since the market debut of 2012. Revenue was down 1% from the same quarter in 2021.

However, Meta shares dropped only a few percentage points in after-hours trading.

Facebook and Instagram ads have historically been popular among marketers because of Meta’s ability to target users. But changes in privacy have made the company’s ad unit less effective and seem to be bringing down costs.

“In the second quarter of 2022, distributed ad impressions across our family of apps increased 15% year-over-year and average cost per ad decreased by 14%,” the earnings report said.

It’s not just meta that has struggled this season. Companies that rely on ad spending, such as Snap and Twitter, have reported weak advertising dollars, citing economic uncertainty and a decrease in marketer spending due to Apple’s changes.

The poor earnings results come in the wake of Meta’s announcement that it plans to put more TikTok-like short-form videos in users’ feeds. Meta CEO Mark Zuckerberg got on the defensive long ago in a call with analysts:

“I want to be clear that we are still ultimately a social company,” Zuckerberg said during a call with analysts. Zuckerberg said Meta hopes that suggesting more content from people the user doesn’t know (such as short-form videos) will lead to more engagement among friends and family, and in turn, more video viewing. He said a “flywheel effect” would develop.

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