Facebook parent Meta announces its first ever year-over-year decrease in revenue from advertising in its earnings report for Q2 2022.
Meta’s most recent earnings report highlights the first time the company has ever seen a decline in revenue from advertising, signaling an upward trend it anticipates will continue.
The Q2 2022 earnings announcement from Meta is the culmination of a decade-long streak of increase in revenue from advertising.
We’ll go over why this is important, what it can mean for the marketing industry, and what’s in store for Meta concerning these numbers.
Meta’s revenue drop blamed on Economic Downturn
There are a several factors that contribute to the unprecedented drop in Facebook’s revenue.
In a conference call for investors Meta CEO Mark Zuckerberg claims that the company has missed its targets because of a slowdown in the economy which is affecting the entire digital advertising industry:
“… it appears that we have entered a downturn in the economy which will significantly impact the digital advertising industry. It’s never easy to determine the depth or length of the cycles will last but I’d suggest that this is direr than it was just a few months ago.”
In addition to a struggling economy, Meta has to contend with the privacy settings of Apple.
The economy is just accelerating with a decline in revenue growth which started with the time Apple allowed users to tell apps not to track their data.
In the end, users are less likely to see relevant ads in their feeds since Meta does not have access to the same amount of information about them.
This creates a difficult circumstance for Meta’s advertising department. Zuckerberg has warned investors not to count on revenues declining throughout the second quarter of next year.
There’s nothing terrible about it. However, it’s not perfect. We’ll look at some of the report’s highlights in the next part.
What are the Numbers?
Meta’s advertising revenue fell by 1 percent in the second quarter of 2022 compared to the previous quarter.
Meta earned $28.82 billion from advertising. However, it was expecting to make $28.94 billion.
Zuckerberg’s Metaverse project, known by”the” Reality Labs division, is quite costly. The work on the project will cost Meta $2.8 billion during the quarter.
One positive thing to keep in mind is that the daily active users on Facebook are growing by 3 percent. The number of users is now 1.97 billion who log in daily.
There’s no evidence that users aren’t interested in Meta’s range of applications, which suggests a chance to increase revenues if the company can find a way to increase the effectiveness of ads.
This guidess us to the next part of our series, in which we’ll discuss what this means for companies and marketers who use Meta’s applications regularly.
What Is It All About?
Meta’s apps don’t seem to be losing their popularity.
The audience is present. The issue is that advertisers have fewer budgets and aren’t receiving the same amount of value from their ads that they did previously.
To combat the problem of declining advertising revenue, Meta has plans to introduce new ways of monetization. In particular, it is looking for ways to earn money from Reels.
In reaction to the Q2 results report, Zuckerberg reiterates his determination to build Facebook and Instagram on Reels.
Reels viewer is among the few areas of Facebook and Instagram that are not entirely commercialized. Therefore, it’s not a profit source right now. However, it could be one soon.
Zuckerberg declares during the earnings call that:
“Soon, the more rapidly Reels grows, the higher revenues it can take from revenue-generating products.”
Meta’s mission is to be more similar to TikTok. If Meta intensifies its focus on Reels, it will invariably cause other kinds of content to appear less.
For marketers and businesses, It’s vital to consider integrating short-form videos into the mix to keep the visibility of Meta’s applications.
In that case, if you do not see the results you’re hoping for through Facebook advertisements, Reels could be a feasible option to increase your reach.