Meta, Facebook parent company, reported its first-ever revenue decline in the June 2022 quarter (Q2 2022). According to its second quarter 2022 results report, total revenue decreased by 1% year on year to $28.8 billion, and the company anticipates a further revenue decrease in the third quarter (July to September) to around $26 billion. Meta overall profit fell 36% to $6.7 billion in the most recent quarter. Reality Labs, Meta division that works on Mark Zuckerberg metaverse fantasies, lost nearly $2.8 billion in the third quarter.
The revenue drop is significant because Meta (formerly Facebook) sailed through multiple COVID-19 waves when the world was fearful of economic uncertainty. The company reported total revenue of $18.6 billion in Q2 2022, compared to $29 billion in the same quarter last year. In both 2020 and 2021, the company revenue increased on an annual basis.
Despite falling revenue, Meta said it was able to increase its daily active users (DAU) margin by 3% year on year. In June, the average DAU was 1.97 billion. It is still a positive sign for the company, as analysts predicted a further drop after DAU fell for the first time last year.
According to the company quarterly results report, "Total revenue in the third quarter of 2022 is expected to be in the $26-28.5 billion range. This forecast reflects the continuation of the weak advertising demand environment that we saw in the second quarter, which we believe is being driven by broader macroeconomic uncertainty. We also expect Reality Labs revenue in the third quarter to be lower than in the second quarter."
The drop in ad sales could also be attributed to Apple's implementation of the 'App Tracking Transparency' feature, which allows iPhone users to choose whether an app can track their activity. Apple explained that apps like Facebook and Instagram track these activities "for the purposes of advertising or sharing with data brokers."
Meta may hope for a change in the fourth quarter of 2022, with the appointment of Chief Financial Officer David Wehner as its first Chief Strategy Officer. The senior executive will be in charge of the company strategy and development. Susan Li, Meta current Vice President of Finance, will be promoted to Chief Financial Officer.
To account for the more difficult operating environment, Meta says it has reduced hiring and overall expense growth plans this year, while "continuing to direct resources toward our company priorities."
Facebook and Instagram are both working on improvements to compete with TikTok, Meta's main rival at the moment. Instagram CEO Adam Mosseri recently stated that the platform's evolution from a photo-sharing app to a video app (i.e. a TikTok-like experience) is unavoidable.
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