Dusseldorf Mark Zuckerberg’s relief could be heard at the analyst conference. The Meta CEO said he was “proud” of his products. “More people are using our services than ever before,” says Zuckerberg.
The American thus highlighted one of the few bright spots in the new quarterly figures. Facebook’s daily active users increased from 1.93 to 1.96 billion in the first three months of 2022.
That’s only a slight increase. But it’s not a drop like last quarter — the first negative growth in the social network’s history. At that time, the stock fell by more than 20 percent. This time, it soared 20 percent in after-hours trading – Meta gained almost $70 billion in market capitalization in one fell swoop.
“The results weren’t as bad as the markets expected,” said Martin Garner, COO of British digital consultancy CCS.
Overall, however, Meta achieved weak numbers in the past quarter. It brought in $27.9 billion, which was below the analysts’ average estimate of $28.3 billion. The Facebook group’s revenue rose 6.6 percent year-on-year, the slowest increase since 2012 – the year Meta went public.
Meta was also disappointed with his forecast. The group expects sales of $28 to $30 billion for the coming quarter, analysts had expected an average of $30.7 billion.
Metaverse is coming at the end of the decade
The win had a positive impact. Although Meta’s profit of $7.5 billion was 21 percent lower than in the previous year, analysts had predicted an even larger drop to $7.1 billion.
What was also well received by investors: Meta reduced its investments for 2022, it only wants to spend 87 to 92 billion dollars, previously it had assumed 90 to 95 billion dollars. “This is arguably a direct response to the loss of investor confidence as the company poured money into new ventures like the Metaverse,” said CCS’ Garner.
The Metaverse downplayed Zuckerberg overall. The Meta boss only briefly addressed the idea of a mixed digital and real world, which was still being presented with great enthusiasm in 2021. It would be a long time before the investments yielded meaningful sales and profits “later in the decade,” Zuckerberg said.
The Metaverse is being developed in the Reality Lab, the unit posted a loss of almost three billion dollars, compared to $3.3 billion in the previous quarter. “Meta has announced new monetization models for its Metaverse investments,” said Raj Shah, managing partner at consulting firm Publicis Sapient, “but adoption is still low.”
Difficult advertising business with short videos
According to Zuckerberg, the reasons for the slow overall growth are very different. The Ukraine war is having an impact. The growing success of the short video service Tiktok is also a problem. Meta introduced the competing product Reels on its photo platform Instagram in 2020. This is growing strongly, but has a problem: “The monetization does not work so well,” said Zuckerberg.
Unlike longer videos, feeds or stories, it is difficult to place ads. “In my 18 years at Facebook, I’ve seen a lot of changes,” Zuckerberg said. “We have mastered them all and will master these too.”
According to Chief Operating Officer Sheryl Sandberg, the company works closely with advertisers to deliver more effective advertising using artificial intelligence and higher automation. “The results are promising,” said Sandberg.
Apple’s stricter data protection regulations in its iOS operating system continue to cause problems. As a result, Facebook or Instagram knows less about the user. According to Sandberg, Meta has “closed a large part of the gap”. Closing it completely would take some time.
How exactly Meta plans to achieve this, Sandberg did not say. Experts are speculating about ideas such as the “Probalistic Attribution Model”, which allows similar conclusions about user behavior with probability calculations and a larger amount of data – and thus targeted and lucrative advertising. “We want to get better with less data,” Sandberg said.
The new EU data protection law, the “Digital Service Act”, will also cause problems for Meta. “This is a significant challenge for the industry,” said Sandberg. However, one still wants to wait for the details of the legislation, “which are of importance”.
Data management problems
Data seems to be an issue for Meta for other reasons as well. According to an internal report to the board, Facebook developers expect a “tsunami” of data protection regulations around the world, not just in Europe. In the report available to Techportal Motherboard, India or South Africa are mentioned.
Even more annoying for Meta: the data protection experts come to the conclusion in the report that the group does not have enough control over the data. Meta would mix different data from users such as personal details or their online behavior, could no longer separate them and therefore would not be able to comply with the rules prescribed by the legislators.
In a statement, Facebook contradicted the impression. “The document does not describe our detailed processes and controls to comply with data protection regulations. It’s just not right to infer that it shows non-compliance.”
More: The core business is weakening, the Metaverse is a long time coming: Analysts are expecting bad figures from the Facebook mother on Wednesday. But there is hope.