Status: 02/02/2023 11:28 a.m
The US tech giant Meta is struggling with high costs and is suffering from its competitor TikTok – now the Facebook parent is reporting the fifth decline in profits in a row. Nevertheless, the prospects are better than expected.
High costs for severance payments and the restructuring of the group have brought the Facebook parent company Meta a surprisingly sharp drop in profits. The surplus collapsed by 55 percent to 4.65 billion dollars – it is the fifth decline in profit in a row.
The company suffers from high costs and strong competitive pressure from TikTok. The Chinese video app is chasing Instagram users away from the Meta subsidiary. In addition, Apple’s new data protection rules make it more difficult for iPhone & Co users to personalize advertising. It is therefore considered less effective and less profitable. Group sales fell four percent year-on-year in the last quarter to just over $32.16 billion.
Sales target higher than expected
The prospects for the future, on the other hand, are better than expected. The outlook has exceeded the expectations of experts: Meta expects sales of 26 to 28.5 billion dollars for the current quarter. Analysts had expected less and had previously forecast an average of $ 27.14 billion. For 2023, Meta anticipates spending of $89 billion to $95 billion; that too is five billion dollars less than before.
The tech giant yesterday signaled a rebound in long-sluggish ad revenue. In addition, Meta boss Mark Zuckerberg promised further cost cuts and announced additional share buybacks with a volume of 40 billion dollars.
Zuckerberg: 2023 “Year of Efficiency”
2023 should be a “year of efficiency” for the group, said Zuckerberg. The focus is on being “stronger and more agile”. Meta will remove layers in middle management so decisions can be made faster. Projects that do not bring the desired results should be stopped more quickly.
Meta had already announced that around 11,000 jobs would be cut last fall. The group booked restructuring costs of $4.2 billion for the quarter. In the current year, expenses are also expected to be lower than previously estimated, partly due to lower investments in data centers.
The relief of investors erupted in a price jump of a good 20 percent in after-hours trading on Wednesday, the last time they rose nine and a half years ago. In their slipstream, the titles of Google’s parent Alphabet, which is also heavily dependent on online ads, and Snapchat operator Snap advanced by up to five percent.
Two billion users every day
Meanwhile, the number of users continues to grow. Facebook now has two billion daily active users – an increase of 16 million within three months. At least one Meta app was last used by 2.96 billion users per day, up from 2.93 billion three months earlier.
At the same time, the “Reality Labs” division is piling up billions in losses, triggering displeasure among investors. In this business area, among other things, the development of the “Metaversum” is bundled, a virtual world. Zuckerberg had declared the Metaverse to be the future of the company and therefore even changed the company name from Facebook to Meta. Zuckerberg reiterated that the investments are important for the long-term future. The division posted an operating loss of around $4.3 billion in the past quarter.
Zuckerberg now also highlighted software with artificial intelligence such as ChatGPT, which can imitate human speech or independently generate images from text descriptions, as an “exciting area”. Meta strives for a leadership role in such technologies. At the same time, the aim is to reduce the currently high costs for computing power in such applications through greater efficiency.