Dhe series of bad news from the technology industry continues: Meta, the parent company of the social network Facebook, reported a drop in sales for the first time ever after the market closed on Wednesday. He also does not expect a quick recovery and promised another minus for the third quarter. The numbers were worse than expected, and the share price was down more than 3 percent in after-hours trading. Since the beginning of the year, the Meta share has lost around 50 percent of its value.
The unusual drop in sales did not come as a complete surprise, Meta had already warned of it in its outlook when presenting the last quarterly figures in April. The minus has to do with currency effects, without which there would have been growth of 3 percent. That would also be a very low plus by meta standards.
“Seem to be at the beginning of a downturn”
Meta makes most of its revenue from online advertising, and that business has slowed significantly in recent times. Co-founder and CEO Mark Zuckerberg said in a conference call, “We appear to be at the beginning of an economic downturn that will impact the online advertising business across the board.” “But I would say the situation looks worse today than it did a quarter ago.”
A number of other Internet companies have also presented poor results in the past few days. The Google parent company Alphabet, for example, reported significantly lower sales growth on its YouTube video site. Twitter and the Snapchat parent company Snap disappointed with their numbers.
Meta’s second-quarter revenue fell 1 percent year over year to $28.8 billion, slightly missing analysts’ forecasts. But because the company’s costs continued to rise significantly, net income fell 36 percent to $6.7 billion. Earnings per share of $2.46 were 13 cents below expectations.
For the third quarter, Meta predicts revenue of between $26.0 billion and $28.5 billion. That would represent a decrease from the prior-year figure of $29.0 billion. The Internet giant now sees itself forced to step on the brakes on costs even more. He expects costs of 85 billion to 88 billion dollars for the full year, in April there was still talk of 87 billion to 92 billion dollars, and that was also a downward correction.
Competition from Tiktok
Zuckerberg said he wants to significantly slow the pace of hiring. He recently said in a staff meeting that Meta wants to hire fewer software developers this year than previously planned.
Meta delivered bad news from the European market: Here the number of daily users of the regular service Facebook fell for the first time in a year, falling from 307 million in the first quarter to 303 million. User numbers increased slightly around the world.
Meta is struggling on both Facebook and Instagram with increasing competition from the smartphone app Tiktok, which is primarily known for short videos. With its services, the group is increasingly orienting itself towards the up-and-coming competitor. For example, he launched the Tiktok-like video feature Reels, available on Facebook and Instagram. He is also changing his algorithms, which means that users, like on Tiktok, see more content that does not come from their friends, but from other online sources. Zuckerberg says today that’s 15 percent of content on Facebook and a little more on Instagram, and Meta expects those shares to double by the end of next year.
This change is not without controversy. This week, reality star Kylie Jenner shared a post titled “Make Instagram Instagram Again.” It read: “Stop trying to be like Tiktok. I just want to see nice photos of my friends.” Jenner is an influential Instagram user who has the third highest number of followers.
In the conference call, Zuckerberg again pointed out the burden of Apple’s new data rules. This hinders the collection of user data on Apple devices, making it difficult for Meta to tailor ads to individual users and measure the success of ad campaigns. The company has said it will cost $10 billion in sales this year.
