What happened? Meta’s poor year shows no signs of improvement. After reporting its first-ever drop in user numbers in February, Facebook’s parent company recently recorded another first: a year-over-year decline in quarterly revenue. The division behind its metaverse project also did not fare well, losing nearly $3 billion for the second consecutive quarter.
Meta’s earnings report showed it had $28.8 billion in revenue for the April-June quarter. That was down 1% from the same period a year earlier, the first time Meta/Facebook has seen revenue decline since going public. The figure was also below analysts’ expectations of $28.92 billion. Net income, meanwhile, fell 36% year-over-year to $6.7 billion.
Meta’s outlook for the rest of the year doesn’t paint a better picture. It forecast third-quarter revenue of $26 billion to $28.5 billion, up from the $30.52 billion forecast by analysts.
Like Twitter and Snap, which saw similarly disappointing financial results, the weakening economy, competition from TikTok and a slowdown in the advertising industry were cited as factors behind the results. “It appears that we have entered an economic downturn that will have a significant impact on the digital advertising industry,” CEO Mark Zuckerberg said in a call with investors. “The situation looks worse than a quarter ago.”
Zuckerberg again blamed Apple’s anti-ad tracking feature introduced in iOS 14 as a significant problem, with the average price per ad falling 14%. Facebook ran full-page ads in 2020 protesting Apple’s decision and saying the change would hurt small businesses.
It was a tough quarter for Reality Labs; the division is focused on Meta hardware and Metaverse aspirations. It dropped $2.96 billion in the first quarter of 2022 and, despite a 48% year-over-year increase in revenue to $452 million, lost $2.8 billion in the second quarter, adding to the $10.2 billion the division bled throughout the year. 2021. We recently heard that Reality Labs is cutting back on layoff projects, including a dual-camera smartwatch, but that’s not enough to prevent it from losing even more money in 2022 than it did last year.
Despite the ongoing losses, Zuckerberg’s faith in the metaverse has not wavered; in fact, the CEO doubled the place. “Given some of the product and business limitations we face today, I’m more confident that these platforms will unlock hundreds of billions of dollars, if not trillions of dollars over time,” he said.
Meta’s report came the same day the FTC announced it would seek to block the company’s acquisition of Within Unlimited, creator of the virtual reality workout app Supernatural.
A report earlier this week revealed that Meta introduced “ruthless prioritization” and “changed performance standards”, which included going after low and average performers and “relocating” (firing) them from of the company. One person believes that up to 10% of the workforce may lose their jobs. In addition, Meta is facing a trademark lawsuit from another company, also called Meta.