Facebook and Instagram parent company Meta has posted its first-ever decline in revenue as it battles growing competition from rival TikTok, while its CEO has warned that headcount will be cut.
Meta CEO Mark Zuckerberg has revealed that the social media giant will be cutting jobs.
“Many teams will be downsizing so we can redirect energy to other areas within the company,” he said Wednesday during an earnings call.
Back in May, the company partially suspended hiring, and recently Meta’s head of human resources, Laurie Gawler, proposed laying off employees who fell short of expectations as the company began operating at “increased intensity,” the memo said.
In June, in an internal memo, Meta’s head of development directed his managers to identify and report underperforming employees so they could fire those employees, the agency said. Wall Street Journal.
Meanwhile, the company posted a profit of US$6.6 billion (AU$9.6 billion), a full 36% decrease from the same period last year when it earned US$10.3 billion (AU$17.7 billion). dollars).
In terms of revenue, it earned US$28.8 billion (AU$41.2 billion), down 1% from US$29 billion (AU$41 billion) a year earlier.
“The drop in quarterly revenue compared to last year shows how quickly Meta’s business has deteriorated,” said Insider Intelligence analyst Debra Aho Williamson. Sydney Morning Herald.
“Prior to these results, we forecast Meta’s global ad revenue to grow 12.4% this year to nearly $130 billion (AU$186 billion). Now it is unlikely that this figure will be reached.”
In addition to the TikTok issue, Meta has also been hit by Apple’s privacy changes that allow users to prevent Facebook and Instagram from following, “Meta leadership questions” and negative views of the company as whistleblowers stepped forwardaccording to Raj Shah, managing partner at American digital consultancy Publicis Sapient.
When news on COO Sheryl Sandberg leaving the companyafter 14 years working alongside Mr. Zuckerberg, broke in June, it couldn’t have come at the “worst time” for Meta, analysts say.
Ms Sandberg, who has a net worth of US$1.6 billion (AU$2.2 billion), was the mastermind behind the company’s massive advertising business.
But her departure also comes at a time when Meta is taking the risky step of investing billions to launch a set of virtual reality metaverse products that analysts say will take years to turn a profit.
“Expect the fall of the Meta to continue until the Meta is able to monetize the metaverse and launch another meta,” Mr. Shah added.
Meta CFO David Wehner blamed the company’s results on continued weak ad demand, which he said was driven by broader macroeconomic uncertainty.
However, the company defied forecasts when it found that Facebook’s daily user base had grown to 1.97 billion, up from 1.96 billion just three months ago.
TikTok is a huge concern as it reigns supreme in a younger demographic.
Sabry Subi, founder of Australian digital marketing agency King Kong, said TikTok has been one of the few major threats to Facebook since it launched 18 years ago.
“Facebook’s normal response would be to simply buy out the offending platform, but that’s not possible with TikTok. But this is not Zuckerberg’s first rodeo, he’s been through worse,” he said.
“Facebook’s constant attempts to retain their younger audience has admittedly been a challenge and they fear they will disappear with their older demographic, but they still have a very valuable marketplace.
“Not only is TikTok’s algorithm more advanced, but being able to compete with Facebook’s ad platform is the elephant in the room. Facebook ad costs are skyrocketing and quality is declining.
“The platform is oversaturated and complicated by censorship and millions of companies competing for the same space, but the numbers released today are not necessarily a sign of the platform’s imminent, impending demise.”
Zuckerberg said in April that the company would change the way users see content to increase engagement, but the changes sparked a backlash among users.
The company said it will recommend content to Facebook and Instagram users from across the social network, not just directly from the accounts they follow, mimicking one of TikTok’s signature features while also showing more videos.
The changes sparked a petition and an image saying “Make Instagram Instagram again” and “stop trying to be a Tiktok” that circulates across the platform, shared by Kim Kardashian and Kylie Jenner, garnering millions of likes.
Instagram Meta head Adam Mosseri said many of the features are still being developed.
“I have to be honest – I believe that more and more Instagram will turn into video over time,” Mosseri said in a video posted to Twitter.
Mr Subi said that Facebook and Instagram will continue to emulate the competition with more video content and updates.
“It remains to be seen if they survive this threat, but there are definitely things like their customer service that they need to address urgently,” he said.
“Facebook falls short when it comes to customer support compared to TikTok and Google where you can talk directly to a rep about support – that’s almost non-existent for Facebook and something the lion’s share of them is happy with today – it’s no longer will help “.
Meta said it also expects its total 2022 spending to be between US$85 billion (AU$121 billion) to US$88 billion ($126 billion), up from the company’s previous forecast of US$87 billion ( AU$124 billion) to US$92 billion. (131 billion Australian dollars).
According to the company, the reason for the fall was the reduction in hiring and the overall plan for rising costs.
Meta’s shares took a hit when the company’s results were announced, falling 3.3% to $163 ($233) after hours.
Originally published as Facebook Meta Owner Experiences First-Ever Revenue Drop, Teams Will ‘Drawn’