The decline in revenue at the Facebook group Meta accelerated in the past quarter. At the same time, costs are rising – and the development of virtual metaverse worlds continues to devour billions with unclear prospects of success. Investors are not happy about it: after the figures were released, the Meta share sometimes fell by about a fifth. Losses mounted as founder and CEO Mark Zuckerberg defended his course.
Meta revenues were down four percent year-over-year to $27.7 billion. The bottom line is that profits fell 52 percent to about $4.4 billion, Meta announced on Wednesday after the US stock market closed.
In the second quarter, Meta reported the first drop in sales, when the minus was still one percent. CFO Dave Wehner pointed out that without the strong dollar, which makes foreign earnings appear lower when converted to US currencies, there would have been a slight increase in sales this time around. For the current quarter, however, Meta has announced a drop in sales to ten percent.
Advertising money is no longer so loose
Meta is concerned about the cuts made by advertisers who spend less on online advertising due to high inflation and economic concerns. The business of Google and the photo app Snapchat are also having a hard time. Meta wants to grow again in the coming year. Although less money is coming in, costs increased by about a fifth to more than $22 billion in the quarter.
“Metaverse” development costs billions
Among other things, the development of virtual worlds, to which Facebook founder Mark Zuckerberg wants to connect the group, continues to consume a lot of money. In the quarter alone, the Reality Labs division, which is working on the so-called Metaverse, posted an operating loss of nearly $3.7 billion.
Since the beginning of the year, a deficit of $9.4 billion has built up – with sales of $1.4 billion. And Zuckerberg announced that Reality Labs’ losses will be “significantly greater” over the next year, partly as new consumer VR headsets arrive. At the same time, he was convinced that it would be an important investment in the long term.
TikTok turns Meta users away
Meta also has a Tiktok problem. The short video app from the Chinese concern Bytedance caught the attention of Facebook and Instagram users, as well as advertising dollars from advertisers. Meta responded with its own short clip platform called Reels. The format is well received, emphasizes Zuckerberg: the short videos on Facebook and Instagram are viewed 140 billion times a day, an increase of 50 percent within six months.
However, this puts Meta at a financial disadvantage as ads around the reel videos make less money than older ad formats. The average price per ad fell 18 percent year over year. Zuckerberg was convinced that this would level off over time.
To reduce costs, Meta has put a brake on the rapid increase in jobs recently and wants to have as many or even fewer employees in the coming year. Office space is also being cut — to the extent of being charged $900 million in expenses in the current quarter.
For the current quarter, Meta forecasts revenue of between $30 billion and $32.5 billion. In the same quarter of the previous year, it was up 20 percent to nearly $33.7 billion.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
