Meta’s declining revenue doesn’t bode well for the social network

Meta has, for the first time in its history, recorded losses in its turnover. This worrying trend for the social network is likely to be long-lasting.

It’s a cold shower: for the first time in its history, the results of Meta, Facebook’s parent company, are in the red. The company shared second-quarter 2022 results on July 27, and said its revenue for the period of $28.8 billion was down 1% from 2021.

Mark Zuckerberg’s company is going through an extremely difficult period, in the context of a global recession and while the revelations of Frances Haugen on the occasion of the Facebook Files, at the end of 2021, once again dealt a blow to its reputation. But the worst could still be yet to come for Meta.

The news is not good for Mark Zuckerberg. // Source: Wikimedia Commons

Losses of billions

Meta’s turnover is not the only indicator in the red: the company also recorded a drop in its net profit of 36%, to 6.7 billion dollars. The “Reality Labs” section, which produces the group’s virtual reality headsets and is in charge of the development of the metaverse, also recorded a loss of $2.8 billion during this quarter.

These poor results were expected. ” They reflect the weak advertising demand we experienced during the second quarter “said the group’s financial director in the press release. ” We also expect Reality Labs results to be even weaker next quarter. “, it is specified.

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The only good news for Facebook: the social network has stopped losing users. // Source: Canva

The extent of Meta’s losses and the bleak prospects for its future are two very worrying factors for the group. The financial director even announced that in anticipation of a ” difficult economic environment “, recruitment within Meta had been reduced. The only good news that the group can retain from this quarter remains the increase in the number of users of its services. While in February, Facebook announced that it had lost some of its users, the trend seems to have been reversed: the number of daily Facebook users increased by 3%, to 1.97 billion.

The hardest part is probably yet to come

But this good news will probably not be enough to save the group, which has to face several challenges. The first concerns its revenues, hard hit by the App tracking transparency mechanism put in place by Apple, which allows iPhone owners to limit the tracking of applications – and therefore, the advertising tracking of advertisers. The Verge estimates that the social network lost 10 billion because of this measure.

Another black spot: the metaverse, on which a large part of Mark Zuckerberg’s ambitions now rest, is not ready. Besides Reality Labs racking up the losses, the group calculated that the section would not be profitable until at least the end of the decade. Long-term losses must therefore still be expected before Meta can hope to see any profits – if there ever are any.

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For now, Mark Zuckerberg’s ambitions in the Metaverse don’t pay off for the company. // Source: Canva

Finally, the big threat on Facebook and Instagram comes from TikTok, which is eating away more and more market share from younger users. In response, Meta made the decision to make Instagram an increasingly video- and recommendation-centric network, trying to come up with its own algorithm to compete with TikTok’s. Only, the measure divides, and some of the biggest stars of the social network, Kim Kardashian and Kylie Jenner, have openly criticized it.

To meet all these challenges, Mark Zuckerberg has not yet presented a new business plan, nor announced a major reorientation. He, on the other hand, kindly called on his less motivated employees to resign, because ” there’s probably a bunch of people in the business who shouldn’t be here “, as he announced during a meeting. Not sure that putting more pressure on the shoulders of Meta employees is the best answer to all these problems — but at least things are clear.

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