Facebook Parent Meta revenue falls short as advertising slumps

Facebook’s parent company Meta was the latest in a parade of tech giants to reveal paltry third-quarter results on Wednesday, highlighting the challenges facing ad-reliant platforms as marketers and brands are reducing their spending.

The social media giant gained $1.64 per share, missing Wall Street’s expectation of $1.89 per share. Meta’s third-quarter revenue was $27.71 billion, higher than analysts’ average estimate of $27.38 billion, according to Refinitiv data. Still, Meta’s third-quarter revenue was down 4.5% from the same period last year.

The company, which makes most of its money from ads, has also continued to add users as competition grows from platforms like the short-form video app TikTok. Meta said that every day 2.93 billion people use one of its apps, including Instagram, Facebook Messenger and WhatsApp.

Meta’s mixed results come as other social networks struggle to attract advertising dollars. A day earlier, Spotify and Alphabet, the parent company of Google, revealed a drop in advertising demand, including YouTube’s first drop in revenue since parent company Alphabet began disclosing it. Snap, the parent company of dying messaging app Snapchat, saw its stock plunge nearly 25% last week after revenue growth fell short of analysts’ expectations.

Meta’s stock fell more than 19% in after-hours trading to $105.09 per share. The company’s fourth-quarter revenue outlook was between $30 billion and $32.5 billion. Analysts expect Meta to post $32.2 billion in fourth-quarter revenue, according to Refinitiv.

Meta CEO Mark Zuckerberg acknowledged on a conference call with analysts that there are a number of challenges facing the company. “I appreciate patience and believe that those who are patient and invest with us will eventually be rewarded,” he said.

Meta has been looking for ways to cut costs as it prepares for an economic downturn. In July, Meta reported its first drop in quarterly turnover in the company’s history and have missed earnings expectations. Zuckerberg said at the time that the company plans “to steadily reduce headcount growth over the next year.” The company said Wednesday that some teams will remain the same size while others will shrink. Meta would only increase the number of workers in its “highest priorities”.

Meta is betting big on the metaverse – its term for virtual spaces where people can work, play and socialize – as its long-term future. She unveiled her high-end Meta Quest Pro Virtual Reality Headset this month. But Meta lost $3.67 billion on its virtual reality and augmented reality division and expects losses to increase significantly in 2023. The company said some of the costs are driven by the launch of its new generation of consumer products. Quest Virtual Reality Headsetscheduled for later next year.

The tech company also faces other challenges in its advertising business. Apple’s privacy changes have made it harder for companies to measure the effectiveness of their ads on Facebook and Instagram.

Insider Intelligence senior analyst Debra Aho Williamson said in a statement that Meta was “on tottering legs with respect to the current state of its business.”

“Mark Zuckerberg’s decision to focus his business on the future promise of the metaverse has diverted his attention from the unfortunate realities of today,” she said. “Meta is under incredible pressure due to weakening global economic conditions, challenges with Apple’s AppTrackingTransparency policy, and competition from other companies, including TikTok, for users and revenue.”

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