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.
It is one of the few bright spots in the quarterly balance sheet of the Internet group. The number of daily active Facebook 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 decline like in the last quarter – when Zuckerberg had to announce negative growth for the first time in the history of the social network. At that time, the stock fell by more than 20 percent. This time it jumped 20 percent in after-hours trading. Meta has increased its market capitalization by almost 70 billion dollars in one fell swoop.
“The results weren’t as bad as the markets had expected,” said Martin Garner, COO of English digital consultancy CCS.
Overall, however, the meta numbers were weak in the past quarter. The Facebook parent company made $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.
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Meta was also disappointed with the prognosis. 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. While Meta’s profit of $7.5 billion was down 21 percent year-on-year, analysts had predicted an even bigger drop to $7.1 billion.
What was also well received by investors: Meta has reduced its investments for 2022 and only wants to spend 87 to 92 billion dollars. The group had previously assumed that the figure would be between 90 and 95 billion dollars. “This is arguably a direct response to the loss of investor confidence caused by new investment in projects 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 will be a long time before the investment generates significant sales and profits, stressed Zuckerberg.
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 for Meta. It was not for nothing that the US internet giant introduced the competing product Reels on its Instagram photo platform in 2020. It’s growing fast, but has a problem: “The monetization doesn’t work that well,” admitted 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 and Instagram know less about the user. According to Sandberg, Meta has “closed a large part of the gap”. Closing it completely will 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 EU’s new 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. India and South Africa could also tighten data protection, according to a report available to the tech portal Motherboard.
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. Metamixed different data from the users, such as personal information or their online behavior, can no longer be separated and would therefore 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 is simply not correct to conclude that data protection is not being respected.”
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.