Meta Reports First Revenue Decline and 36 Percent Profit Drop

Beyond the economic tumult, Meta faces its own particular set of challenges. Last year, Apple made privacy-related changes that hampered Meta’s ability to measure and deliver its advertising on Apple-made mobile devices. (Meta makes the vast majority of its advertising revenue from smartphones.)

It is also staring down the barrel of one of its toughest competitors in TikTok, the Chinese-owned video app that has captured the attention of more than one billion people in just a few years. Mr. Zuckerberg has begun to shift his company’s products to mimic TikTok’s offerings, including making sweeping changes to Instagram and Facebook.

At the same time, Mr. Zuckerberg has been spending big on his vision for the metaverse. He has told investors, technologists and others that the effort may take years to come to fruition and that the endeavor will be costly. Some investors are skeptical that the investments will pay off in the long term.

Still, there were bright spots in Meta’s earnings report. The company said its “daily active people,” its term to describe users across its family of apps — which includes Facebook, Instagram and WhatsApp — increased to 2.88 billion, up 4 percent from a year ago. That exceeded analysts’ expectations that the company was losing visitors. The Facebook app also saw user growth within the United States, an area that some believed was saturated.

Mr. Zuckerberg said he was encouraged by other areas of Meta’s business that are driving growth and engagement, like the Reels video product, a feature within Instagram that is similar to TikTok’s video offering. Investments in artificial intelligence recommendation algorithms have also driven more people to use the service and for longer periods, the company said.

His goal, he said, was to eventually make more money from Reels, which is not as lucrative for Instagram as the app’s other advertising formats. Part of the challenge was to push through a “cannibalization” effect, where more people use the new Reels product and shift away from viewing more valuable ads displayed in between the photos and stories portions of the app. Mr. Zuckerberg said he believed it was only a matter of time before Meta figured out how to better make money from Reels.

Article source: https://www.nytimes.com/2022/07/27/technology/meta-earnings-revenue-decline.html