Facebook's parent company Meta has seen its first-ever revenue downturn, according to a just-released quarterly report from the social platform giant.
The news comes alongside a variety of belt-tightening measures: The company will be reducing the number of new hires across the next year and won't be renewing deals with around 50 US news partners.
Meta will also be pushing for more AI-powered content recommendations, CEO Mark Zuckerberg says.
Why Are Revenues Down?
Meta posted quarterly revenue of $28.8 billion, down nearly 1% from the previous year's second quarter, and even a little below analyst predictions of $28.9 billion.
Granted, that's still a massive amount of money flowing in. But it's noteworthy as Meta's first year-over-year drop. Zuckerberg blames the entire digital advertising industry:
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” the Wall Street Journal quotes Zuckerberg saying. “It’s always hard to predict how deep or how long these cycles will be, but I’d say that the situation seems worse than it did a quarter ago.”
In addition, The Verge reports that Apple's “Ask not to track” feature — which lets iPhone users opt out of Facebook's data tracking — has alone been responsible for a loss of $10 billion in ad revenues for Facebook in the last year alone.
Plus, Meta's Reality Labs division costs a good chunk of change but is far away from producing results for the much-anticipated Metaverse. Altogether, it adds up to a rough road ahead for Meta.
What's in the Future?
Meta will be cutting costs in a few ways in the near future. First, it'll be slowing — but not stopping — headcount growth, meaning that getting hired at the tech company will become more of a challenge.
One example of additional money-saving measures is the news that Meta will not be renewing its existing deals with US news publishers. The company had struck three-year deals back in 2019 to pay publishers for the articles that run on Facebook's News Tab. Those deals are up this year, and its source of funding that US publishers will have to count out of their own revenues.
Plus, Zuckerberg also said he'll be relying more on AI-powered recommendations — the reason why you sometimes see content from accounts that you've never interacted with before in your feed on Instagram or Facebook. Currently, algorithmic recommended content is about 15% of feeds on Facebook, and a little higher on Instagram, but…
“We expect these numbers to double by the end of next year,” Zuckerberg says.
There's no question that Facebook and Instagram will remain social powerhouses for years to come, and we've known that for a while — businesses should definitely have a social media strategy that includes them.
However, it's safe to say now, Meta is entering a new era in which it'll need to replace the ad revenue growth it built its empire on.