Meta’s latest earnings report reveals the company’s first-ever annual decline in ad revenue, pointing to a downtrend that it expects to continue.
Meta’s second-quarter 2022 earnings report marks the end of a decade-long streak of ad revenue growth.
We’ll explain why this is important, what it means to marketers, and what’s next for the meta given these numbers.
Meta’s revenue decline was attributed to the economic downturn
There are many factors that have contributed to the unprecedented decline in Facebook revenue.
On an earnings call with investors, Meta CEO Mark Zuckerberg said his company fell short of targets due to the economic slowdown affecting the entire digital advertising market:
“…it looks like we’ve entered a recession that will have a broad impact on the digital advertising business. It’s always hard to predict how deep or how long these cycles will be, but I’d say it looks worse than it did a quarter of a century ago.”
On top of the poor economy, the Meta has to deal with Apple’s privacy settings.
The economy is accelerating a decline in revenue growth that began when Apple made it possible for users to ask apps not to track their data.
As a result, people see less relevant ads in their feeds because Meta doesn’t have access to much data about them.
This adds to the dismal situation of the Meta ads business, and Zuckerberg is warning investors to expect revenue to continue to decline in the next quarter.
However, not everything is bad. In the next section, we’ll review more highlights from the report.
What are the numbers?
Meta ad revenue decreased by one percent in the second quarter of 2022 compared to the year-ago period.
Meta brought in $28.82 billion from advertising, though it expected to earn $28.94 billion.
Zuckerberg’s Metaverse project, better known as the Reality Labs division, is a big expense. Work on the project cost Meta $2.8 billion in the second quarter.
One positive trend to note is that daily active users on Facebook are up three percent. There are now 1.97 billion people logging in every single day.
The number of daily active users across Facebook, Instagram, Messenger and WhatsApp is up four percent from last year.
There’s no indication that users are losing interest in the Meta Apps suite, which means there’s a chance of increased revenue if the company can figure out how to make ads more effective.
This brings us to the next section, where we’ll review what this means for businesses and marketers who use Meta Apps every day.
What does it all mean?
Meta apps are by no means declining in popularity.
The audience is there. The problem is that advertisers have smaller budgets, and they don’t get as much value from ads as they used to.
To address the problem of declining ad revenue, Meta plans to introduce new types of monetization. More specifically, the company is working on ways to make money from Reels.
In response to the second-quarter earnings report, Zuckerberg reiterated his commitment to building Facebook and Instagram around Reels.
The Reels viewer is one of the only sections of Facebook and Instagram that isn’t fully monetised. So it’s not a revenue driver right now, but it could potentially become a driver in the future.
Zuckerberg says on the earnings call:
“In the near term, the faster Reels grows, the more revenue will replace the higher-earning products.”
Meta’s goal is to be like TikTok. As Meta increases its focus on Reels, it will inevitably cause other types of content to be shown less.
For businesses and marketers, it’s worth considering how to incorporate a short video into the mix to maintain visibility on Meta Apps.
To that end, if you’re not getting the results you’re looking for with Facebook ads, Reels may be a viable solution for expanding your reach.
Featured image: Rokas Tenys/Shutterstock