Status: 07/28/2022 08:54 a.m
For the first time since the IPO in 2012, the turnover of the US internet giant Meta has fallen. And the group does not expect the situation to improve in the coming months either. Is it the end of an era?
Facebook parent company Meta has reported its first decline in sales since going public ten years ago, blaming the weak economy. Meta does not expect an improvement for the next few months either. After years of rapid growth, the development is tantamount to the end of an era. Facebook founder and CEO Mark Zuckerberg said the company wants to focus on the long term.
Meta revenue fell about 1 percent year over year to $28.8 billion in the second quarter. The bottom line is that profits shrank by 27 percent to almost 6.7 billion dollars. Top executive Sheryl Sandberg also pointed to the strong dollar leading to an unfavorable translation of foreign earnings on the balance sheet. Without the rise in the dollar exchange rate, there would have been a three percent increase in sales, she emphasized in a conference call with analysts.
Weak online advertising market
This means that sales were still below the expectations of analysts, who had already forecast a weak quarter after the problems at Snap and Twitter. Meta CFO Dave Wehner cited the weakening of the online advertising market, which was already noticeable in the second quarter, in view of the economic uncertainty. So far, Facebook and Meta have shown themselves to be resilient to all economic downturns.
With knowledge of the interests and social connections of billions of users, the platform offered advertisers the opportunity to target their ads to the desired audiences. In addition to the fierce competition from the video platform TikTok, Meta is struggling with Apple’s data protection rules. Developers like Facebook must now explicitly ask iPhone users for permission to track their behavior across different apps and services. Many users rejected this – the torpedoed ad models, including on Facebook.
number of users increases
The number of users who access at least one app from the group every day rose from 2.87 to 2.88 billion within three months. Facebook saw an increase from 1.96 to 1.97 billion daily users. The group also includes Instagram and WhatsApp.
Meta also announced a change in leadership yesterday. The previous CFO Wehner is to take over the newly created position of strategy chief in November. The new chief financial officer will therefore be Susan Li. A gap opened up on the executive floor after Sandberg announced her retirement. She was regarded as Zuckerberg’s right-hand man and an architect of Facebook’s business model.
Antitrust watchdogs target VR business
One of Zuckerberg’s long-term initiatives is to align the company with the “metaverse” — a virtual world into which he envisions business and social life will shift. Facebook pioneered the movement with its virtual reality (VR) activities, which see users wearing special glasses immersing themselves in digital worlds. The Reality Labs division, in which the “Metaverse” development and the previous VR business are bundled, posted an operating loss of $2.8 billion in the past quarter. Meta announced a price increase for its VR glasses a few days ago.
However, the VR business of Meta is threatened by the American competition authorities. The US antitrust authorities are targeting Meta’s strong market position in the VR business for the first time. The FTC went to court to prevent Meta from buying a developer company.
Less competition through takeover?
The company Within Unlimited, which Meta wants to buy, is behind a VR fitness app called “Supernatural”. The FTC argues that Meta wants to occupy this market with its “VR empire” through the takeover instead of competing there with its own offer. According to the lawsuit filed yesterday, the acquisition could lead to less competition and potentially higher prices. “And Meta would be one step closer to the ultimate goal of owning the entire ‘Metaverse’.”
Meta already owns the VR app “Beat Saber”, which is also designed for movement. The group has bought several VR specialists in recent years. According to a media report, Meta wants to spend more than 400 million dollars on the purchase of Within that was announced last fall. Meta countered that the FTC’s lawsuit was based on “ideology and speculation” rather than facts. The accusation that the takeover would be anti-competitive was “unbelievable,” according to a blog entry. Among other things, “Beat Saber” and “Supernatural” are fundamentally different, argued Meta. Under its new boss Lina Khan, the FTC is taking a tougher stance against the big tech companies, which have long benefited from rather lax competition regulation in the United States.