Meta in trouble: the company reports a first-ever revenue decline

Something that we've all been somewhat feeling (or at least most of us) seems to be happening. After the year started somewhat bleak for Facebook and Meta, and despite the rebranding and focus on the metaverse, it seems that Meta's in trouble. The Verge reports that the company has now reported a decline in revenue for the first time... ever.

Meta reports a decline in revenue for the first time

The nonstop revenue growth that Facebook has seen for a decade has now hit the wall. The new report from the social media company indicates its first-ever yearly decline in revenue for the second quarter. There is a 1 percent drop to $28.8 billion (yes, we know, that's still a lot of money), but the predicted growth for the third quarter could fall even more.

On top of that, the overall net income (the profit) for Facebook's parent company Meta has fallen 36% to $6.7 billion (in 2021, it was $10.4 billion). And, unfortunately for Mark Zuckerberg's metaverse ambitions, the division responsible for building those virtual reality worlds, called The Reality Labs, lost $2.8 billion in the same quarter.

This drop in revenue growth was expected on Wall Street and it didn't come exactly as a surprise to investors. Nevertheless, it underlines that Meta's business is facing serious challenges.

First off, we all know (or probably at least have heard of) Apple's App Tracking Transparency, a feature that blocks third-party tracking for ads, something Facebook heavily relied on. It made ads on iPhones less effective and ultimately cost the social media company $10 billion in ad revenue last year. And now, on top of that, the slowing economy has caused advertisers to further limit their expenses.

TikTok is one of the main rivals Facebook and Instagram are currently facing, with its ever-growing popularity. In an attempt to better compete, Meta's redirected the focus on Facebook and Insta towards short videos, as well as recommended posts. Zuckerberg reportedly stated that the percentage of content from people you don't follow that you see on those two social media platforms will more than double next year. And, Meta is building a costly AI to do just that.

But it's not all bad news for Meta. Despite the revenue declining, Facebook reported growth in the number of daily users, which grew by 3% to 1.97 billion. Overall, now 2.88 billion use its social apps (Facebook, Messenger, Instagram, and WhatsApp) daily.

An increase in the consumption of videos has shown stronger than anticipated engagement trends, stated Zuckerberg. On top of that, Reels is reportedly monetizing faster than Stories did (back when Meta copied Stories from Snapchat). Looking towards the future, Meta expects Reels to be a revenue driver, but so far, it's not been prioritized and not a lot of money has been made from it.

Zuckerberg additionally stated that the period necessitates that the company gets more done with fewer resources.