Things Suck for Zuck as Meta’s Growth Comes Unstuck

Source​

The company reports drop in revenue for the first time ever​

Since going public in May 2012, Facebook (now Meta) has reported its first-ever revenue decline.

In its Q2 earnings, the company revealed it had missed virtually all its targets, bringing to close a decade of unprecedented growth and relentless revenue. Earnings per share fell short. Revenue fell short. Monthly active users fell short. Average earnings per user fell short.

In sum, it all fell short. And for a company whose sole goal is connection — lol, sorry, I mean growth at all costs — these numbers make bad reading and continue the recent downward trend in its performance. Projections for Q3 hardly painted a confident picture either, with revenue expected to miss predicted estimates again. The company blamed a “continuation of the weak advertising demand environment,” which they believe is caused by “broader macroeconomic uncertainty.” During the call, Zuckerberg did note that the company would deliver on one trend — laying off staff — admitting that “I expect us to get more done with fewer resources.”

In after-hours trading, shares dropped nearly 5%. Zooming out from the chart compounds the bad news, with Meta Platforms shares down over 40% since the start of 2022.

The disappointing earnings report caps off a truly terrible year for the company. There have been problems aplenty, including:

• Francis Haugen turned whistleblower, lifting the lid on some of the poor practices going on inside the company. She confirmed what we all suspected; the company puts “astronomical profits before people.” The backlash was strong, and the company made numerous PR gaffs, including a powderpuff PR piece that denied any wrongdoing.
• Leaked slides showed that the company was aware that Instagram was harming teenage girls. Instead of considering a strategy to fix the problem, they used the same strategy of discrediting the evidence and denying any wrongdoing.
• Slowly but surely, it’s becoming clear that the company was too slow to react to election meddling and is partly accountable for the Capitol Hill riots. Again, the company is denying any wrongdoing, touting the usual nonsense about free speech and why the platform is not in a position to censor.
• User growth has hit the ceiling. In Feb 2022, the company reported that, for the first time in its 18-year history, worldwide daily users decreased. The stock plummeted 26% in the following day’s trading — its worst single-day percentage decline on record. The stock has never recovered.
• Apple’s data tracking changes, which have had huge rippling effects across the social media landscape, have hit hard. In Feb 2022, Meta estimated this would result in a $10 billion loss in sales revenue. The changes continue to impact Facebook’s ability to provide the cutting-edge ad targeting it once could in its data-harvesting heyday.
• TikTok’s continued rise to the top of the social media throne. The Chinese-owned app has been crushing all in its path, leaving Meta’s two juggernauts, Facebook and Instagram, facing an identity crisis as they try to become more like their competitor without upsetting its user base. At present, it’s failing badly. So much so that they upset Kylie Jenner, the poor thing. In all seriousness, Jenner caused an 8% drop in Snap’s shares when she made her feelings about a new design public. We can expect to see her wishes to “Make Instagram Instagram again” cause a similar ripple and have Meta-execs sweating.

We could probably go on all day.

What you need to know is that the last few years have been a total shit show for the company.

And not even its tactical rebrand to Meta and a pivot away from the blue app to a Metaverse future has been able to divert attention and restart the growth machine.

Can Zuck buck the trend?​

To offset the beating it’s taking from TikTok, the company plans to continue transforming its apps into… TikTok. It will do so by adding more and more video content to its Facebook platform and slowly transforming Instagram into a direct clone. This comes despite backlash from users and creators alike.

Instagram is dying. Slowly, but surely. And the move to video presents another problem: the format doesn’t monetize as well, especially on Facebook. Meta has admitted as much.

So that pins the company’s hopes on Zuck’s vision of the internet’s future — the Metaverse.

And he was as optimistic as ever, despite seemingly making little ground since the big announcement on Oct 2021. In the call with investors, Zuckerberg said the downturn highlights why shifting to the Metaverse is necessary. Not only will it create a platform that Meta controls entirely, it means that it can bleed it dry for those advertising dollars. Zuck added, “Given some of the product and business constraints that we face now, I feel even more strongly now these platforms will unlock hundreds of billions of dollars — if not trillions over time.”

Trillions of dollars.

You have to hand it to the man; he’s going to die on the Metaverse hill.

But making the Metaverse a (virtual) reality is proving to be an uphill battle. Meta has already sunk billions into the project, and billions more will follow. Reality Labs — the business unit responsible for building the Metaverse — recorded a $2.8 billion loss in the second quarter. And the recent announcement that the Oculus, the entry-point device for this virtual world, is about to have its price hiked by $100, a move that will further slow down adoption.

With the public already losing interest in the larger concept, Meta is in a race against time to bring this vision to life and start banking serious ad dollars from it. But with it being years away at best, the bigger question is, will Meta remain relevant long enough to deliver it?

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