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Facebook posts loss of revenue for the first time

Facebook is a company used to increasing its profit every quarter. However, Q2 2022 has proven different as the social media giant posted a 1 percent drop in revenue at $28.8 billion. The company has already predicted another drop in the present quarter.

Meta, Facebook’s parent company, saw 36 percent less profit, reporting $6.7 billion. Its Reality Labs division behind Mark Zuckerberg’s metaverse ambition lost a whopping $2.8 billion.

Meanwhile, Facebook, Twitter, TikTok, and other big tech companies have agreed with the EU to fight online misinformation.

Wall Street already predicted negative growth for Facebook, but it is still evidence that Meta is facing severe challenges to its business on multiple fronts. One key area is Apple’s “Ask app not to track” feature, which has reduced the quality of Facebook ads. That move alone costs the company $10 billion in ad revenue annually. In addition, businesses are reducing their advertising budgets thanks to a slowing economy.

Meta is fighting back by trying to become like the more successful social media, TikTok. It is gradually turning Facebook and Instagram into video-centric networks. Also, like TikTok, Meta’s systems will recommend the content that users will see. Zuckerberg has revealed that users of both platforms will see more content from accounts they are not following, with the share set to double next year. Meta is working on the algorithm that will power the recommendation engines, and the CEO admitted that developing the AI is expensive.

Despite suffering a decline in revenue, Facebook’s daily users increased by 3 percent to 1.97 billion, a sign of reveal as the opposite was reported in recent quarters. Meta now has 2.88 billion daily users across Facebook, Messenger, Instagram, and Whatsapp, an increase of 4 percent year on year. Monthly active users were 3.65 billion.

It appears the focus on videos is paying off, as Zuckerberg mentioned during Meta’s earnings call that engagement trends were stronger than expected. He also revealed that Reels, Facebook’s copy of the TikTok app, was monetizing faster than Stories that was lifted from Snapchat earlier. Reels should make more money for Meta in the long run, which is why it is prioritizing the feature even though it is not earning much now.

Zuckerberg is optimistic about the future: “This is a period that demands more intensity, and I expect us to get more done with fewer resources. I think we’re going to come through this period as a stronger and more disciplined organization.”

Part of Meta’s press release says: “We expect third quarter 2022 total revenue to be in the range of $26-28.5 billion. This outlook reflects a continuation of the weak advertising demand environment we experienced throughout the second quarter, which we believe is being driven by broader macroeconomic uncertainty. We also anticipate third quarter Reality Labs revenue to be lower than second quarter revenue. Our guidance assumes foreign currency will be an approximately 6% headwind to year-over-year total revenue growth in the third quarter, based on current exchange rates.

“In addition, as noted on previous calls, we continue to monitor developments regarding the viability of transatlantic data transfers and their potential impact on our European operations.

“We expect 2022 total expenses to be in the range of $85-88 billion, lowered from our prior outlook of $87-92 billion. We have reduced our hiring and overall expense growth plans this year to account for the more challenging operating environment while continuing to direct resources toward our company priorities.

“We expect 2022 capital expenditures, including principal payments on finance leases, to be in the range of $30-34 billion, narrowed from our prior range of $29-34 billion.

“Absent any changes to U.S. tax law, we expect our full-year 2022 tax rate to be above the second quarter rate and in the high teens.”

Written by HackerVibes

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