Facebook and Instagram parent Meta has posted its first-ever fall in revenue after it warned Apple’s privacy change would hit a staggering $10 billion in lost sales this year .
Meta also struggled with growing competition from rival TikTok, while its CEO warned that headcount would be reduced.
Apple’s move, which allowed people to “ask the app not to track” with a single click, appeared to have torpedoed Facebook’s advertising model, which combined data from different companies to personalize ads.
One Twitter user said it was “hilarious” that a “seemingly innocuous iOS update – which allowed users to turn on or off data collection/tracking/analysis by apps with a single click – single-handedly torpedoed 10 billion dollars and counting on the Facebook ad revenue”.
Meta CEO Mark Zuckerberg revealed that jobs would be cut at the social media giant.
“A lot of teams will be downsizing so we can shift energy to other areas of the company,” he said on an earnings call Wednesday.
In May, the company had implemented a partial hiring freeze, while Meta’s head of human resources, Lori Goler, recently suggested it would cut employees who didn’t meet expectations as the company began operating with “more intensity,” said one note.
In June, an internal memo from Meta’s engineering chief told its managers to identify and report low performers so they could force those employees out, reported the Wall Street Journal.
Meanwhile, the company made $6.6 billion ($9.6 billion) in profit, which plunged 36% compared to the same time last year when it earned $10.3 billion ($17.7 billion ).
On the revenue side, it earned $US28.8 billion ($41.2 billion), down 1% from $US29 billion ($41 billion) a year earlier.
“The year-over-year decline in quarterly revenue indicates how quickly Meta’s business has deteriorated,” said Insider Intelligence analyst Debra Aho Williamson, reporting that Sydney Morning Herald.
“Prior to these results, we had forecast Meta’s global ad revenue to rise 12.4% this year to nearly $US130 billion ($186 billion). Now, it’s unlikely to reach that figure.” .
Aside from its TikTok issue, Meta has also suffered from Apple’s privacy changes that allow users to prevent Facebook and Instagram from tracking them, “questions about Meta’s leadership,” and negative sentiment about the company as whistleblowers, according to Raj Shah, a manager. partner of the American digital consultancy Publicis Sapient.
When news of COO Sheryl Sandberg’s departure from the company, after 14 years working alongside Mr. Zuckerberg, he said in June, couldn’t have come at a “worse time” for Meta, analysts said.
Ms Sandberg, who has a net worth of $1.6 billion ($2.2 billion), was the mastermind behind the company’s massive advertising business.
But his departure also comes at a time when Meta is attempting a risky move by investing billions to launch a suite of virtual reality metaverse products, which analysts say would take years to turn a profit.
“Expect the decline of Meta to continue until Meta can monetize the metaverse and start another Meta-reverse,” Shah added.
Meta’s chief financial officer, David Wehner, blamed the company’s results on continued weak advertising demand, which he said was driven by broader macroeconomic uncertainty.
However, the company defied the predictions of experts when it revealed that Facebook’s daily user base had increased to 1.97 billion people, compared to 1.96 billion just three months ago.
TikTok is a big concern as it is in a younger demographic.
Sabri Suby, founder of Australian digital marketing agency King Kong, said TikTok was one of the few major threats to Facebook since it launched 18 years ago.
“Facebook’s usual reaction would be to simply buy the offending platform, but with TikTok, that’s not possible. But this isn’t Zuckerberg’s first rodeo, he’s been through worse,” he said.
“Facebook’s constant attempts to keep their younger audience has been a challenge, and they fear that they will fade away with their older demographic, but they still have a very valuable place in the market.
“Not only is TikTok’s algorithm more advanced, but the potential to compete with Facebook’s ad platform is the elephant in the room. The costs to run ads on Facebook are increasing and the quality is decreasing.
“The platform is saturated and complex with censorship and millions of companies competing for the same space, but the numbers released today are not necessarily a sign of the platform’s imminent and pending demise.”
Zuckerberg said in April that the company would change the way users view content in an effort to increase engagement, but the changes have sparked a backlash among users.
The company said it would recommend content to Facebook and Instagram users from across the social network instead of just directly from the accounts they follow, mimicking one of TikTok’s signature features, as well as showing more videos.
The changes have caused a petition to circulate on the platform and an image saying “Instagram Instagram Again” and “stop trying to be tiktok”, which was shared by Kim Kardashian and Kylie Jenner gathering millions of likes.
Meta’s head of Instagram, Adam Mosseri, said many of the features were still evolving.
“I have to be honest: I think more and more Instagram will become video over time,” Mosseri said in a video posted on Twitter.
Suby said Facebook and Instagram would continue to imitate rivals with more video content and updates.
“Whether or not they will survive this threat has yet to be determined, but there are definitely things, like their customer service, that they urgently need to address,” he said.
“Facebook has no problem with customer support compared to TikTok and Google where you can speak directly to a representative for support – this is almost non-existent for Facebook and something that has its ethos of” like or group “satisfied so far, this won’t do anymore”.
Meta revealed that it also expects its total spending for 2022 to be between $85 billion ($121 billion) and $88 billion ($126 billion), down from the company’s previous forecast of $87 billion ($124 billion) to $92 billion. ($131 billion).
Reduced hiring and the overall growth plan for expenses was the reason for the decline, the company said.
Meta shares took a hit when the company’s performance was announced, falling 3.3 percent to $US163 ($233) in after-hours trading.