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Facebook Group stops sales decline – money for Metaverse
Meta has announced its Q1 figures. photo
© Rafael Henrique/SOPA Images via ZUMA Press Wire/dpa
Last year, the Facebook group Meta came under pressure: declining revenues, billions in costs for Mark Zuckerberg’s dream of the Metaverse, competition from Tiktok. Now sales are increasing again.
After nine months of declines, the Facebook group Meta is on the up again. In the past quarter, there was a three percent increase in sales, while analysts had expected a decline. Meta is also expecting a plus for the current quarter. Founder and boss Mark Zuckerberg sees software with artificial intelligence as a growth driver. At the same time, his vision of the future of virtual worlds continues to devour billions – but remains a niche business that has recently shrunk.
In the midst of the hype surrounding the chatbot ChatGPT, no tech company can currently present its quarterly figures without mentioning artificial intelligence – and Meta was no exception. Zuckerberg promised conversations with software on Meta’s chat services WhatsApp and Messenger, as well as AI tools for generating images on Facebook and Instagram. Artificial intelligence will affect all of the group’s apps and services, he said.
At the same time, Zuckerberg emphasized that this does not mean a departure from his vision for the so-called Metaverse, a digital world as a future online platform. Zuckerberg aligned the company with this in 2021 – and also had the group name changed from Facebook to Meta to underline the new focus. Investors are concerned about the high spending on Metaverse development, while Zuckerberg defends it as an investment in the future.
In the Reality Labs division, in which digital worlds and special glasses for virtual reality are developed, the operating loss rose to almost four billion dollars from 2.96 billion dollars a year earlier. The increase is mainly due to personnel costs and severance payments for layoffs, said CFO Susan Li. For the current year, Meta expects further increasing losses at Reality Labs.
The division brought in just $339 million in revenue last quarter. The trigger for the significant decline compared to the 695 million dollars in sales a year earlier were poorer sales of the VR glasses Quest 2, said Li. The app business generated 28.3 billion dollars during this period and brought in an operating profit of 11 .2 billion dollars.
Competition from the video app Tiktok
In recent months, Meta has also felt competition from the video app Tiktok, which is particularly popular with young users and is increasingly attracting advertising dollars. Meta countered with the short video format Reels, where the clips are recommended for software users just like Tiktok. As a result, the time users spend on Instagram has increased by 24 percent, Zuckerberg said.
That’s not good news for Meta’s revenue, as ads in Reels are cheaper than other formats like newsfeeds and stories. The popularity of Reels Meta costs money. That won’t change until the end of this year or early 2024, Li said. In the past quarter, consolidated sales increased to $28.6 billion.
In the months leading up to this, Meta had been troubled by an overall decline in online ad spend and problems with ad models following Apple’s privacy-enforcement measures on iPhone. In the final quarter of 2022, however, the Facebook group exceeded analyst forecasts despite a renewed decline in sales. At the start of pre-market US trading on Thursday, the stock rose a good 11 percent.
More than 20,000 jobs eliminated
Meanwhile, quarterly profit fell 24 percent to $5.7 billion (5.16 billion euros), as Meta announced after the US market closed on Wednesday. The group recently initiated the second round of layoffs after a significant increase in jobs during the pandemic. More than 20,000 job cuts are expected to be completed in May.
The group is concerned about the uncertainty surrounding data transmission from the European Union to the USA. The process for a new legal framework for this is currently underway after the previous model “Privacy Shield” was overturned by the European Court of Justice. Facebook generates around 10 percent of its advertising revenue from ads in EU countries, Li said.
Meta has a massive reach among online platforms and is still growing. The number of daily active Facebook users reached 2.04 billion, up from 2 billion three months earlier. 3.02 billion users access at least one of the group’s apps every day. At the end of 2022 it was still 2.96 billion. Meta also includes Instagram and the chat services WhatsApp and Messenger. On a monthly basis, 3.81 billion users were active in at least one meta app.