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The owner of Facebook and Instagram, Meta was struck by a reduction in advertising revenues in the three months leading up to July, which resulted in the first year-over-year revenue decline in the company’s history.
Although Meta’s overall revenue dropped 1% to $28.8 billion (£23.7 billion), the firm managed to fend off a reduction in users. After years of substantial gains, analysts worry that the company’s growth may have peaked.
While more businesses are vying for advertising dollars, competitors like TikTok have reduced its appeal.
As e-commerce spending slows down from its pandemic boom and businesses become more cautious with their spending due to concerns about inflation and the conflict in Ukraine, Meta, which typically controls more than 20% of the global ad market, warned investors that ad sales were likely to decline once more in the months to come.
In response to the downturn and the company’s plans to redirect investment into new areas, such as its virtual reality platform, Horizon, in a wager that the so-called metaverse is its best prospect for growth, Meta boss Mark Zuckerberg said the company would reduce its hiring “steadily” over the next year.
Those plans have attracted the attention of regulators, including the Federal Trade Commission, America’s consumer protection agency, which announced it would file a lawsuit to stop Meta’s acquisition of the virtual reality fitness company Within Unlimited, which is the owner of the app Supernatural, due to monopoly concerns.
According to Angelo Zino, senior equities analyst at CFRA Research, the success of those ambitions is yet years away because Meta struggled to develop its user base. He argued that the company is now one with little to no growth.
Facebook revealed its first-ever fall in daily users earlier this year. In response, the business, which also owns WhatsApp, recently changed its algorithms on Instagram and Facebook to behave more like TikTok, promoting content to users from beyond the base of accounts they follow.
The actions have sparked outrage from users, perhaps most notably from celebrity Kylie Jenner, who uploaded a picture with her more than 360 million Instagram followers last week saying, “Restore Instagram to its original form. (Stop attempting to be Tiktok) I just want to see cute pictures of my buddies.) sincere thanks to all “.
According to the firm, 2.88 billion users used one of its applications daily in June, up from 2.87 billion in March, and 1.97 billion individuals logged into Facebook on average daily.
Although Mr. Zuckerberg expressed satisfaction at indicators that users were spending more time on the company’s apps, the quarter’s profitability nevertheless fell 36 percent to $6.7 billion.
He declared that although at a slower rate than anticipated, the company would keep making investments.
Meta and other social media companies face challenging conditions
The issues are not unique to Meta, whose vice president of strategy Sheryl Sandberg said in June that she would be leaving the company.
This week’s parent company of Google and YouTube, Alphabet, revealed its weakest revenue growth since the pandemic struck in 2020, with officials frequently cautioning investors that the company was experiencing the impact of economic “uncertainty.”
Twitter also revealed an extraordinary revenue decline, while Snap warned about “extremely tough” circumstances following its lowest quarter ever, sending its stock down 25%.
According to Nikhil Lai, senior analyst for performance marketing at Forrester Research, Meta is particularly vulnerable to any market slowdown because of its reliance on small and medium-sized enterprises, which are “spooked” about the economy.
When Apple updated its privacy settings last year, it also upset the company’s carefully developed methodology for targeting advertisements.