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Meta Platforms Report First Decline in Revenue

  • Facebook’s decade-long streak of non-stop growth in revenue came to an end when the revenue of the parent company, Meta, slipped 1% to $28.8 billion
  • Meta, which commands the lion’s share of the global ad market, warned investors that ad sales could fall again in the months ahead
  • Even though Meta registered a decline in revenue, it managed to increase Facebook’s daily user base by 3% to 1.97 billion

Meta’s results for the second quarter of 2022 showed that Mark Zuckerberg’s vision of the metaverse is still very expensive. The social network company announced a 1% decline in sales for Q2, which dropped to $28.8 billion, and forecast that growth in the third quarter could fall further. Meta registered a 36% decline in overall profit to $6.7 billion. Reality Labs, which is in charge of realizing Mark Zuckerberg’s vision for the metaverse, lost $2.8 billion during the quarter.

Reels Revenue on the Rise

According to Meta’s founder and CEO Mark Zuckerberg, Reels achieved a $1 billion yearly revenue run rate for ads on the short-video creation platform that competes with TikTok. Reels also now has a greater revenue run rate than Facebook/Instagram Stories at the same post-launch times. Reels accounted for more than 20% of the time on the site, the company officials stated during the Q1 earnings call. The company sees huge potential for growth in the area of advertisements and Reels, which Meta launched in 2021, is expanding rapidly.

The TikTok Rivalry

Meta is redesigning Facebook and Instagram to place more emphasis on short videos and posts that its system suggests to users, to face competition from TikTok. During a conference call with analysts, Zuckerberg predicted that by the end of the year, half of the content people view on Facebook and Instagram will originate from the profiles they do not follow. He claimed that it would be expensive to build the AI required to make that happen.

Challenging Conditions

Globally, social media businesses and digital marketing platforms are in disarray due to a spate of resignations and a decline in advertising revenue. After the outbreak of the COVID-19 pandemic in 2020, Alphabet, the parent company of Google and YouTube, recorded its worst revenue growth in the week ending June 29. Executives frequently warned investors that the company was feeling the effects of economic “uncertainty.” Besides reporting an extraordinary decline in sales, Twitter and Snap issued extremely tough warnings following their weakest quarterly results, which resulted in a 25% decline in share price.



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