Meta reports first ever quarterly decline in revenue
Weak financial results come as FTC this week sued Meta in an antitrust case to prevent it from acquiring a firm behind the virtual reality workout app
Facebook parent company Meta has reported its first-ever quarterly revenue decrease since going public in 2012.
Although the company managed to fend off a reduction in users, it was impacted by a drop in ad revenue and increased competition from TikTok.
The social media behemoth recorded revenue of $28.8 billion in the second quarter of 2022, down 1% from the $29.08 billion it reported in the same period the previous year. Similarly, the company's net earnings dropped to $6.69 billion, down 36% from the previous year.
Overall expenditures and expenses, however, increased by 22% to $20.5 billion.
Meta CEO Mark Zuckerberg said the present economic situation has had an impact on digital ad sales, which are the company's primary source of revenue.
"The situation seems worse than it did a quarter ago," Zuckerberg said in an earnings call.
Meta reported mixed results for user growth.
According to the firm, 2.88 billion people used one of its apps daily in June, up from 2.87 billion in March; and 1.97 billion logged into Facebook on average daily, up from 1.96 billion in March.
The company provided a bleak prediction for the third quarter, estimating sales between $26 billion and $28.5 billion, which is less than the analysts' estimate of $30.52 billion.
With the dollar currently strong, Meta, like with many other global firms, is experiencing some revenue pressure, as sales made in other currencies amount to less in dollar terms. Based on current exchange rates, Meta anticipated a 6% revenue growth headwind in the third-quarter.
In an attempt to compete with TikTok, Meta is redesigning Facebook and Instagram, putting an emphasis on short videos and posts that its algorithm suggests to users.
Zuckerberg said the company would reduce hiring on a "steady" basis over the next year in response to the economic slowdown and the company's plans to shift investment into new areas, including its virtual reality platform, Horizon.
FTC sues Meta
Meta considers the so-called metaverse as its best prospect for future growth, although the plans have drawn scrutiny from regulators, including the US Federal Trade Commission (FTC), which this week sued Meta in an antitrust case to prevent it from acquiring Within Unlimited, the firm behind the virtual reality (VR) workout app Supernatural.
In its lawsuit, the FTC accused Meta of planning to expand its VR empire by attempting to unlawfully acquire a dedicated fitness app. The agency said Meta was already a key player at every level of the VR ecosystem.
Over the years, Meta has completed a number of acquisitions of prominent VR applications and game studios; though the deal with Within Unlimited looks to be one of its more significant bets.
John Newman, deputy director of the FTC's Bureau of Competition, said Meta already has a best-selling VR fitness app, and is capable of competing more closely with Within Unlimited's popular Supernatural app.
However, the company "chose to buy market position instead of earning it on the merits," Newman alleged.
A Meta spokesperson said the FTC's lawsuit is based on speculation rather than evidence.
"By attacking this deal in a 3-2 vote, the FTC is sending a chilling message to anyone who wishes to innovate in VR," the spokesperson said.
"We are confident that our acquisition of Within Unlimited will be good for people, developers and the VR space."