Wednesday, July 27, 2022 8:10:47 PM
7/27/22, 8:06 PM
Facebook parent Meta Platforms Inc. posted its first decline in revenue and issued a muted outlook on digital advertising as it contends with growing competition from rival TikTok.
The company reported quarterly revenue of $28.8 billion, down almost 1% from a year earlier and slightly below the $28.9 billion Wall Street was expecting. It marks the first time that the company has posted a quarterly drop in revenue from the year earlier.
"We seem to have entered an economic downturn that will have a broad impact on the digital advertising business," Chief Executive Mark Zuckerberg said Wednesday. "It's always hard to predict how deep or how long these cycles will be, but I'd say that the situation seems worse than it did a quarter ago," he said on an earnings call.
Meta is grappling with a digital advertising market in upheaval from surging inflation and other factors that are causing a slowdown in ad spending. Google parent Alphabet Inc. on Tuesday reported the slowest rate of growth since the second quarter of 2020, when the pandemic crimped demand for advertising in some areas. Rival Snap Inc. reported its weakest-ever quarterly sales growth last week while Twitter reported a decline in revenue.
Meta also disclosed that Facebook's daily active user base rose to 1.97 billion users. The figure was 1.96 billion three months ago. The increase defied expectations of analysts surveyed by FactSet who thought user numbers would fall.
The company posted a net profit of $6.7 billion for the second quarter, the third quarter in a row Meta's bottom line has fallen. The company hasn't experienced such a slump since the fourth quarter of 2012.
The weak advertising demand was reflected in Meta's average price per ad, which fell 14% in the quarter. A year ago, the company reported an increase of 47%, year over year, for its average price per ad.
The company said it continued to face challenges in targeting ads as a result of changes made by Apple Inc. to the iPhone's operating system. Chief Operating Officer Sheryl Sandberg, on her last earnings call before she departs Meta after 14 years, said the company is adapting its business to do better ad targeting -- with less user data -- with products such as click-to-message ads, which open a chat with a business whenever a user clicks on the ad.
Such ads are already a multibillion-dollar business growing at double digits, she said. "We are hugely optimistic about this area of our business, and I am very convinced it will work," Ms. Sandberg said.
Chief Financial Officer David Wehner said the company, like others, is feeling the pinch from the strong dollar, which is weighing on the top line.
Meta's shares have retreated since the company posted quarterly results in February that showed a sharper-than- expected decline in profit, gloomy revenue outlook and dip in daily users.
Meta's stock closed more than 6% higher and fell more than 4% after hours following the results.
The company also said it expects its total expenses for 2022 to be between $85 billion and $88 billion, down from the company's previous outlook of $87 billion to $92 billion. The company attributed the lowered forecast to a reduction in hiring and overall expense-growth plans for the year.
Mr. Zuckerberg repeated that the company plans to slow the pace of long-term investments and steadily reduce head- count growth over the next year.
"This is a period that demands more intensity," Mr. Zuckerberg said. "And I expect us to get more done with fewer resources."
Meta is going through a period of transition. Mr. Zuckerberg in April said the company would change how users would see content, in a bid to boost engagement. The company would use artificial intelligence to recommend content to Facebook and Instagram users from around those social networks, rather than solely showing users content from accounts they already follow. The effort mimics one of the signature features of rival TikTok, which Mr. Zuckerberg in February said posed stiff competition for Meta.
Nearly one in six posts shown on Facebook and Instagram feeds are now coming from accounts that users don't follow and are based on artificial intelligence recommendations, according to stats shared by Mr. Zuckerberg. That could rise to nearly one in every three posts shown to users coming from accounts they don't follow by the end of 2023.
During the quarter, Meta saw a 30% increase in the time that users are engaging with Reels, the company's answer to TikTok short-form videos, Mr. Zuckerberg said Wednesday.
Meta, however, doesn't yet monetize Reels at the levels of some of its other features.
"In the near term, the faster that Reels grows, the more revenue that actually displaces from higher monetizing surfaces," Mr. Zuckerberg said. "In theory, we could mitigate the short-term headwind by pushing less hard on growing Reels. But that would be worse for our products and business longer term."
Earlier this year, Meta said it planned to slow the pace of some of its long-term investments and adjust hiring plans. In May, the company disclosed a sharp slowdown in hiring, and in June, the company's head of engineering told his managers in an internal memo to identify and report low performers so they could force those employees out. Earlier this month, the company let go of 368 contractors, including several custodial staff, at its Menlo Park, Calif., headquarters.
The company on Tuesday also said it planned to raise the price of its Quest 2 virtual-reality headset by nearly 34% to $399.99, citing a rise in the costs to make and ship the products.
The company's Reality Labs division, which includes VR hardware, posted revenue of $452 million. Analysts expected it to generate $431 million in quarterly sales.
Separately, the Federal Trade Commission said Wednesday it is seeking to block Meta from acquiring Within Unlimited Inc. and its virtual-reality dedicated fitness app, Supernatural. The deal, the FTC alleges, would lessen competition in the market and violate antitrust laws. Meta rejected the FTC's position and said the purchase would be good for the development of the virtual-reality market.
The company also announced that come November, Mr. Wehner will transition into chief strategy officer, a new role at the company. Succeeding him as CFO will be Susan Li, Meta's current vice president of finance. Mr. Wehner has served as Meta's CFO since June 2014.
Write to Salvador Rodriguez at salvador.rodriguez@wsj.com
(END) Dow Jones Newswires
"someone not knowing can never show the "knowing", whereas someone knowing can hide 'the knowing' at any time"
Recent META News
- Nike Stock Drops 14% in Pre-Market; Nokia Acquires Infinera for $2.3 Billion, and More News • IH Market News • 06/28/2024 10:50:25 AM
- Dow Dips, Nasdaq Gains, Oil Prices Rise • IH Market News • 06/26/2024 11:00:03 AM
- SolarEdge Stock Falls 13%, Wegovy Approved in China, Grail Nasdaq Debut, Apple Rejects Meta Chatbot • IH Market News • 06/25/2024 10:36:11 AM
- Bitcoin Drops to $60,000, Mt. Gox to Reimburse Creditors in July, Riot Platforms Board Restructures • IH Market News • 06/24/2024 07:09:18 PM
- UPS Divests Coyote Logistics in $1.025 Billion Deal with RXO, Under Armour Agrees to $434 million Settlement, and More News • IH Market News • 06/24/2024 11:00:20 AM
- Trump Media Resells Stocks and Warrants; KB Home Exceeds Q2 Expectations, and More News • IH Market News • 06/20/2024 10:55:11 AM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/18/2024 08:42:26 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/18/2024 08:03:05 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/17/2024 10:15:11 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/17/2024 10:13:54 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/17/2024 10:12:21 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/17/2024 09:05:21 PM
- Goldman Sachs Raises S&P 500 Forecast for 2024; Disney Secures Deadpool & Wolverine in Chinese Cinemas, and More • IH Market News • 06/17/2024 10:49:12 AM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/14/2024 08:50:56 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/13/2024 10:33:20 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/13/2024 08:56:04 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/13/2024 08:40:23 PM
- Tesla Surges 5% in Pre-Market; Virgin Galactic Drops 9% Following Reverse Stock Split, and More News • IH Market News • 06/13/2024 11:24:25 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/13/2024 01:49:15 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/13/2024 01:47:48 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/13/2024 01:46:31 AM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/12/2024 09:00:03 PM
- Paramount Ends Skydance Talks, Oracle Shares Surge 8.7% on New Partnerships, and More News • IH Market News • 06/12/2024 11:19:10 AM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/11/2024 08:55:02 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 06/11/2024 08:26:51 PM
Mass Megawatts Announces $220,500 Debt Cancellation Agreement to Improve Financing and Sales of a New Product to be Announced on July 11 • MMMW • Jun 28, 2024 7:30 AM
VAYK Exited Caribbean Investments for $320,000 Profit • VAYK • Jun 27, 2024 9:00 AM
North Bay Resources Announces Successful Flotation Cell Test at Bishop Gold Mill, Inyo County, California • NBRI • Jun 27, 2024 9:00 AM
Branded Legacy, Inc. and Hemp Emu Announce Strategic Partnership to Enhance CBD Product Manufacturing • BLEG • Jun 27, 2024 8:30 AM
POET Wins "Best Optical AI Solution" in 2024 AI Breakthrough Awards Program • POET • Jun 26, 2024 10:09 AM
HealthLynked Promotes Bill Crupi to Chief Operating Officer • HLYK • Jun 26, 2024 8:00 AM