Tough times at Meta, with the company reporting a decline in monthly active Facebook users and a further slowdown in revenue, as global economic trends continue to affect the company’s overall performance.
First, about usage: Facebook currently has 1.97 billion daily active users, a slight increase from last quarter.
The increases were driven almost entirely by the Asia Pacific market, with Facebook continuing to grow specifically in India and Indonesia. Although the use of Facebook has continued to decline in Europe, this time significantly.
Obviously, some of that would be blamed on Russia, where Facebook is facing restrictions due to government censorship surrounding the Ukraine invasion. Facebook has 70 million Russian users, and with this in mind, it’s probably surprising that the decline hasn’t been more significant in this region.
But then again, Facebook’s monthly active user counts look even worse.
As you can see, Facebook lost two million MAUs overall in the period, with European losses again being the most significant.
The Russian invasion likely explains much of this, so it may not be as big a deal as it seems, while Facebook has continued to see growth in all other markets, albeit slight in some.
As such, it’s difficult to say what the numbers mean, in a broader growth context, given the surrounding environment and impacts around the world.
Meta has also provided the use of its ‘family of applications’, which incorporates Facebook, WhatsApp, Messenger and Instagram.
As you can see here, in general, Meta continues to grow, just a little more than in the last period.
Again, the broader impacts of Russia’s war in Ukraine are a major factor, so it’s hard to draw anything definitive from this. But the conflict doesn’t seem to be abating either, and that will continue to have various market impacts, aside from the horrendous human cost, well into the future.
In terms of revenue, Meta generated $28.82 billion in the quarter, compared to market expectations of $28.94 billion.
Again, Europe is where Meta is experiencing the most impact, which makes a lot of sense of course, but remains a challenge for Meta.
Meta attributes the slowdown to weaker ad demand fueled by “wider macroeconomic uncertainty”, while it has also seen lower sales of its VR headsets, impacted by production delays, rising costs, etc.
Just this week, Meta announced a price increase for its flagship Quest 2 VR headset, which is a big deal considering Meta needs to get more headsets into more homes to make its vision of the metaverse a reality. We are also heading into the holiday season, when we are most likely to see a jump in sales. That could make it a particularly impactful change, one that could have knock-on effects for the company’s broader plans for the next stage.
Though this chart is likely to be the most discussed of the latest Meta results:
Meta’s overall revenue, that is, the money it receives after costs, is at its lowest level in two years.
That provides more context for why the company is now embarking on cost-cutting measures and why CEO Mark Zuckerberg recently told staff that many of them “shouldn’t be here.”
Meta’s headcount jumped from 59,000 in 2020 to 72,000 a year later, as part of its growing push into the metaverse and expansion of its global presence. That push, given the changing economic landscape, has ultimately proven too aggressive, and has since seen Meta abandon projects like its own smartwatch, consumer Portal devices, and social audio projects, while also cutting investment in original content and your newsletter offer.
It sounds like Meta is too big to fail, but the chart above provides a real scope of how much your investment in the metaverse is costing, which could ultimately pay off, if Meta becomes the next generation engagement platform, for a wide range of options. But the risk is also clear, and Meta will have to tread more carefully.
Which could be tough, as Zuckerberg also vowed to “go for it” in regards to changing the metaverse and guiding the future of digital interaction. This week, Zuckerberg told staff that Meta is in a ‘philosophical competition’ with Apple to build the metaverse, with the two tech giants set to clash over what comes next.
As Zuckerberg explained:
“This is a competition of philosophies and ideas, where they believe that by doing everything themselves and integrating closely, they build a better experience for the consumer, and we believe that there is much to be done in specialization between different companies, and [that] It will allow a much larger ecosystem to exist.”
To get to the top, Meta will need to keep pumping money, while its ad revenue will likely continue to decline, at least in the immediate term.
It’s a tough sell for the company, which now needs to face shareholders and explain the grand vision once again.
The message will be that this is the right path, that you have to stay the course, that you can’t let another company push and take over space in the metaverse.
How it is received could have a huge impact on the continued expansion of the platform, which will also influence ad display, user experience, and opportunities.