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Meta Reports First-Ever Revenue Decline

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Meta Lofo with Facebook on phone screen | Image by Shutterstock

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Dealing with escalating competition from TikTok, Facebook parent company Meta Platforms Inc. reported its first revenue decrease and provided a dampened prognosis for digital advertising.

Meta shares have fallen by roughly 50% this year, highlighting investor anxiety over the sustainability of the company’s primary online advertising business. Meta’s average price per ad decreased by 14% for the quarter, reflecting the lackluster advertising demand. According to the company, the average price per ad was up 47% from the previous year.

The company announced quarterly revenue of $28.8 billion, less than the $28.9 billion Wall Street anticipated and down over 1% from a year earlier. After the findings were announced, Meta’s shares dropped more than 4% but closed more than 6% higher.

The troubling Meta results are a continuation of a trend that rivals Snap and Twitter began last week. Executives at both companies blamed the global economic downturn and problems with mobile platforms in the internet advertising industry for their disappointing second-quarter performance.

According to Meta, Facebook’s daily active user base increased to 1.97 billion from 1.96 billion three months earlier. The rise confounded analysts at FactSet, who predicted a decline in users.

The company reported a net profit of $6.7 billion for the second quarter. In the third consecutive quarter, Meta’s bottom line decreased. Meta has not seen this kind of decline since the fourth quarter of 2012.

Meta’s Chief Operating Officer Sheryl Sandberg stated in June that she would be leaving the company after 14 years, and this earnings report would be her last. She noted that the company is changing its business to improve ad targeting with products like click-to-message ads, which open a chat with a company whenever a user clicks on the ad.

The company has begun changing its approach to targeted ads, partly due to recent changes in the iPhone operating system: Apple Inc.’s App Tracking Transparency feature, released with iOS 14.5 last year. The update allows users the option of preventing app developers from accessing their device ID, which is used to target and evaluate online ads.

The feature elicited February predictions of a steep drop in Meta revenue in light of the potential for Facebook users to opt out of the data sharing.

Zuckerberg stated in April that the company would alter how consumers view material to increase interaction. Instead of only displaying user information from profiles they currently follow on Facebook and Instagram, the company would utilize artificial intelligence to propose content across both social networks.

The attempt imitates one of rival TikTok’s distinguishing characteristics, which Zuckerberg claimed in February presented fierce competition for Meta.

According to statistics provided by Zuckerberg, almost one in six posts displayed on Facebook and Instagram feeds currently originate from accounts that users do not follow and are based on AI suggestions. By the end of 2023, that number may increase to almost one in three posts users see originating from accounts they do not follow.

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