Meta Platforms reports 32 percent lower operating profit, 36 percent lower net profit for the second quarter of 2022. Facebook, Instagram, Messenger and WhatsApp are still adding users, but advertisers are reducing their advertising bookings. “A challenging macro-environment” is the reason, says Meta boss Mark Zuckerberg. In plain language: concern about the economic downturn leads to smaller advertising budgets.
In North America, Meta Platforms recorded three percent less revenue, in Europe even eleven percent less. This is where the weak euro comes through. In the rest of the world, Meta continues to grow, but it accounts for less than a third of its total sales, so overall quarterly sales are down 1 percent. If the euro had not fallen, Meta could report an increase of three percent. But that’s wishful thinking, so the group is preparing changes.
Audio-GIFs for cash
This includes the increased use of moving images with sound, as is known from audio GIFs. They were popular in the 1990s. Meta’s Chief Operating Officer Sheryl Sandberg recommended this form of advertising to her customers in the usual telephone conference with financial analysts after the announcement of the quarterly figures. Advertisers could place video-like advertisements with less effort. Sandberg is also pleased that more and more companies are communicating with their customers via meta-channels. In the future, Metas artificial intelligence will also create automated messages for small businesses, explained Zuckerberg.
The company boss also announced that he would allocate more content to his users that they did not consciously choose. Artificial intelligence is supposed to select and present more and more postings from users that you don’t follow yourself. Currently, 15 percent of the content of the Facebook feed is chosen by AI, on Instagram more. The shares are expected to double by the end of 2023 – not least because users diligently spread such AI recommendations through private messages.
For Zuckerberg, this multiplication is also proof that the increased curation of content does not represent a departure from the “social” element of his social networks. In the future, the social element will lie in people passing on the AI recommendations to other people. Half of all private messages on Instagram are already used to spread content from the video reel.
Do more with less
Zuckerberg gives his redesigned management team the task of making the company more efficient: “Get more done with fewer resources!” is the slogan. More is to be achieved with less use of funds, and operations are to become “stronger and more disciplined”.
The reason is that Meta’s profit margin fell from 43 percent in the second quarter of 2021 to 29 percent in the second quarter of 2022. While revenue has fallen by one percent to $28.8 billion within a year, there has been a jump in costs by 22 percent to $20.5 billion – partly because the number of employees has fallen by a third in one year increased to around 84,000.
Meta remains $8.4 billion in operating income (-32%) and $6.7 billion in net income (-36%) in the second quarter. Meta counted 3.65 billion users via Facebook, Instagram, Messenger and WhatsApp in June, of which 2.88 billion even every single day. This is a new record and an increase of four percent year-on-year. Russia’s attack on Ukraine has prompted a series of censorship measures, otherwise the increase would be even higher, Meta believes.
Meta users recently had to put up with significantly more advertising: the number of impressions was 15 percent higher worldwide in the second quarter, while average revenue fell by almost the same proportion. Zuckerberg is now putting the brakes on several major long-term projects. Although they are not stopped, they are expanded more slowly.
At the same time, Meta is slowing down the pace of new hires – just like other tech giants like Google, Microsoft and SAP, this will become clear next year. Some meta teams are even said to shrink. Chief Financial Officer David Wehner expressly left open whether the group workforce will shrink overall in 2023.
For the current quarter, Meta expects a further decline in sales from 29 billion a year ago to between 26 and 28.5 billion dollars. Meta is reducing the planned expenditure by three to four billion dollars. After the financial figures were announced, Meta shares fell by around five percent in after-hours trading.
For Sheryl Sandberg it was the last quarterly figures as COO. The Facebook maker resigns. Her position will not be filled, at least not in the known form. While the title of Chief Operating Officer goes to Javier Olivan, his role will be less broad. This is accompanied by various personnel restructuring. The current Chief Financial Officer Wehner will take over the newly created position of Chief Strategy Officer in November, and his previous deputy Susan Li will then take over as CFO. Sandberg will retain her seat on Meta’s board of directors, but otherwise wants to do charitable work.
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