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Facebook reports its first ever revenue decline, pointing to a deteriorating economy

Facebook reports its first-ever revenue decline, pointing to a deteriorating economy.

Meta, Facebook’s parent company, experienced its first revenue decline in its decade as a publicly traded company, portending a difficult economic chapter for the digital advertising behemoth.

facebook-revenue-declines-2nd-quarter-earnings

On Wednesday, Zuckerberg took a detour from that journey to reiterate the company’s most immediate priorities: to foster social connections and to provide users with the algorithmic-powered stream of content from creators that has made modern social media companies popular, particularly TikTok.

“I want to be clear that we are still, at our core, a social company focused on connecting people,” Zuckerberg said during an investor call.

The announcement comes on the heels of news that Facebook parent company Meta experienced its first quarterly revenue decline in a decade. And Zuckerberg’s remarks shed light on the company’s short-term survival strategy as it confronts unprecedented macroeconomic challenges as well as specific threats to its business model.

Facebook reports its first-ever revenue decline, indicating that the economy is deteriorating.

Meta, Facebook’s parent company, saw its first revenue decline in its decade as a publicly traded company, signalling the start of a difficult economic chapter for the digital advertising behemoth.

On Wednesday, Zuckerberg took a detour from that journey to reiterate the company’s top priorities: fostering social connections and providing users with the algorithmic-powered stream of content from creators that has helped modern social media companies, particularly TikTok, become popular.

“I want to be clear that we are still, at our core, a social company focused on connecting people,” Zuckerberg said during a conference call with investors.

The announcement comes after Facebook parent company Meta reported its first quarterly revenue decline in a decade. Furthermore, Zuckerberg’s comments shed light on the company’s short-term survival strategy as it faces unprecedented macroeconomic challenges as well as specific threats to its business model.

Several factors have contributed to Facebook’s unprecedented revenue drop.

In an earnings call with investors, Meta CEO Mark Zuckerberg stated that his company missed targets due to an economic slowdown affecting the entire digital advertising market:

“… we appear to have entered an economic downturn that will have a wide-ranging impact on the digital advertising industry.” It’s difficult to predict how deep or how long these cycles will last, but the situation appears to be worse than it was a quarter ago.”

Meta has to deal with Apple’s privacy settings on top of a bad economy.

The economy is only accelerating a decline in revenue growth that began when Apple enabled users to request that apps not track their data.

As a result, because Meta doesn’t have as much information about them, people see less relevant ads in their feeds.

This aggravates Meta’s advertising business, and Zuckerberg warns investors that declining revenue will continue into the next quarter.

Ad revenue at Meta fell 1% in Q2 2022 compared to the same period last year.

Meta earned $28.82 billion from advertising, despite expecting to earn $28.94 billion.

The Reality Labs division of Zuckerberg’s Metaverse project is an expensive endeavour. In Q2, Meta spent $2.8 billion on the project.

One encouraging trend is that Facebook’s daily active users have increased by 3%. Every day, 1.97 billion people access the internet.

Daily active users on Facebook, Instagram, Messenger, and WhatsApp are up 4% year on year.

There’s no sign that users are losing interest in Meta’s suite of apps, which means the company has a chance to increase revenue if it can figure out how to make ads more effective.

That brings us to the next section, where we’ll discuss what this means for businesses and marketers who use Meta’s apps on a daily basis.

Meta’s apps are by no means losing popularity.

The audience has arrived. The issue is that advertisers’ budgets are shrinking, and they aren’t getting the same value from ads as they used to.

Meta intends to offer new types of monetization to address the issue of declining ad revenue. More specifically, the company is looking into ways to monetize Reels.

In response to the second-quarter earnings report, Zuckerberg emphasises his dedication to building Facebook and Instagram around Reels.

The Reels viewer is one of the few unmonetized sections of Facebook and Instagram. As a result, it is not currently a revenue generator, but it has the potential to become one in the future.

In the earnings call, Zuckerberg stated:

“The faster Reels grows, the more revenue it displaces from higher monetizing products in the short term.”

Meta’s ambition is to become more like TikTok. As Meta increases its emphasis on Reels, other types of content will inevitably be shown less.

To maintain visibility on Meta’s apps, businesses and marketers should consider how to incorporate short-form video into the mix.

To that end, if you’re not seeing the results you want from Facebook ads, Reels could be a viable option for increasing your reach.

 

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