If income falls into the metaverse, does it make a noise?
For the first time in Meta’s history, it reported a year-over-year decline in total revenue, down 1% in the second quarter to $28.8 billion – estimates analysts missing $28.94 billion.
Ad revenue was down year over year from $28 billion to $28.152 billion.
The total number of ad impressions served on all Meta surfaces increased by 15%, but the average price per ad decreased by 14%, due to a reduction in advertiser demand and the evolution from the mix to low monetization surfaces, aka Reels.
Meta also gave weak advice. It forecasts total third-quarter revenue to be between $26 billion and $28.5 billion. Facebook raised more than $29 billion in the third quarter of 2021.
“We appear to have entered an economic downturn that will have a significant impact on the digital advertising industry, and it is always difficult to predict the depth or duration of these cycles,” Mark Zuckerberg told investors on the call. to the company’s results on Wednesday. “But I would say the situation looks worse than a quarter ago.”
Meta is not alone in this boat.
Snap bled in the second quarter, Google’s growth rate is slowing, and YouTube’s ad revenue is also falling rapidly.
Why does this happen? Pick your reason: a looming recession, war in Ukraine, loss of signal, and advertisers pulling back in the face of uncertainty (as if you could read an article about an investor call without seeing the word “uncertainty”).
Meta’s outgoing COO Sheryl Sandberg (she announced her impending departure in June, and this is her final earnings call) also pointed to the normalization of e-commerce after “the peak of the pandemic.”
All good points. But Meta is truly unique at a crossroads.
It prioritizes Reels as it has to compete with TikTok, and some users are ticked off that Instagram is turning into a TikTok clone.
But while Zuckerberg was careful to assert that Facebook is “ultimately a social enterprise about helping people connect,” it’s easy to tell he’s much more excited about the metaverse than he is. Meta’s main source of income: advertising.
And it’s going to be a long time before Meta’s vision is realized, if it is.
In the meantime, Meta is investing in “adapting our ad system to do more with less data,” Sandberg said. It works on its Conversions API, business messaging, lead ads, and develops privacy-enhancing technologies.
But, as one investor aptly observed on the call, “If you look at previous periods where you gained a competitive advantage, you also had a big data advantage that…you can’t possibly -be more benefit from post-IDFA compared to [Google, Amazon and TikTok].”
Supporting your cash cow during an economic crisis while dealing with platform changes and betting the farm on a future that has yet to materialize and likely won’t materialize for some time? Good luck.