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Meta Platforms, the parent company of Facebook and Instagram, reported on Wednesday its first quarterly sales decline, as economic turmoil caused advertisers to shrink budgets.
Meta revenue was $28.8bn in the second quarter, falling short of the $28.9bn average analyst estimate. The company’s forecast for the current quarter also fell short. Shares slid more than 6% in late trading.
The company’s advertising sales efforts are hitting a number of snags. Marketers are spending less due to various economic pressures, leaving Meta and its peers to compete for the smaller budgets. Apple’s privacy rules have made ads on Facebook and Instagram less effective.
Meanwhile, in an effort to compete with TikTok, the social networks have been showing more users short-form videos, a format advertisers are still becoming comfortable with. It’s not making as much money off of that attention. Every day, 2.88-billion people are using one of Meta’s social networks, slightly below the 2.91-billion average analyst estimate.
Shares of Menlo Park, California-based Meta fell as much as 6.3%, after closing at $169.58. The stock has lost half its value this year.
Meta is undergoing a period of immense change, with CEO Mark Zuckerberg trying to rally his employees to work more diligently to retain users, attract young people and prevent a migration to ByteDance’s popular TikTok app.
Meta put more Reels — its TikTok-inspired short-form videos — in its apps, and started paying creators to post them. The company also made a significant change to the social apps’ algorithms, to focus on showing people new kinds of content from those they don’t follow.
That slowdown in advertising spending has hit some competitors more than others. Alphabet’s Google saw an increase in ad sales, especially in search ads where marketers pay for direct-response advertising. But Snap and Twitter both struggled to meet sales goals; Twitter’s revenue declined.
To combat the uncertainty, Facebook has tried to rein in costs by slowing hiring and focusing on fewer priorities, like developing its short-form video strategy and its algorithmic recommendation engine.
The company is still investing in the Metaverse, the immersive virtual-reality world that Zuckerberg thinks we will eventually work, shop and communicate through. But the spending has slowed; some projects, like a watch that could take photos, were shelved.
Bloomberg News. More stories like this are available on bloomberg.com
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.