Meta begins to raise the bar after a grueling year


Posted Apr 27, 2023, 5:38 AM After a tough 2022, Mark Zuckerberg is starting to…

Meta begins to raise the bar after a grueling year

Meta begins to raise the bar after a grueling year

Posted Apr 27, 2023, 5:38 AM

After a tough 2022, Mark Zuckerberg is starting to see light at the end of the tunnel. The California group Meta – parent company of Facebook, Instagram and WhatsApp – announced Wednesday evening results that exceeded analysts’ expectations, which caused its stock to jump nearly 12% in trade after the financial markets closed.

Its revenues in the first quarter rose 3% year-on-year. They amounted to 28.6 billion dollars, instead of the 27.7 billion expected by analysts. In the next quarter, the social networking giant expects to reach 32 billion dollars in sales.

Its net profit fell, on the other hand, by 24% over one year. It stands at $5.7 billion. Costs have slipped, in part due to a $1.14 billion layoff plan in the first quarter. But the number of users worldwide continues to grow. More than three billion people now use the Facebook, Messenger, WhatsApp or Instagram apps at least once a day.

Tense economic environment

“In this economic environment – and after the disaster that was 2022 – 3% year-over-year revenue growth is a success,” said Debra Aho Williamson, analyst at Insider Intelligence. “Meta’s robust second quarter guidance is another indicator that the company may be overcoming its challenges. »

However, all is not won for Meta, far from it. The group “needs to finish rebuilding its ability to sell targeted ads after the debacle caused by Apple’s privacy choices demonstrate to advertisers why it is better to invest in Reels than in TikTok and convince eager creators to stay, ”lists the analyst.

Finally, Meta “must deal with the rise in advertising space on online sales sites, including Amazon, which risks capturing the expenses of companies wanting to reach consumers as close as possible to their purchasing decision”, continues the latter. . “If Meta manages to do these four things, he will emerge stronger from this ‘year of efficiency’”, decreed by Mark Zuckerberg, she believes.

“annus horribilis”

Meta is struggling to recover from an “annus horribilis” that began in February 2022, when the group announced that Facebook, its flagship social network, had lost users for the first time in its history. This decline spooked the financial markets, accustomed to the smooth growth of tech giants.

Even if the number of users started to grow again after this slump, the giant had to face the difficulties in the online advertising market , which weighed on its accounts. Last year, Meta’s revenue fell for three quarters in a row. Its stock collapsed from nearly $380 in September 2021 to… $90 in early November 2022.

Three waves of layoffs

Faced with these difficulties, Mark Zuckerberg decided to cut staff, declaring that 2023 would be “the year of efficiency” for Meta. The group laid off 11,000 people in November, then again 10,000 people in March. After these two waves of layoffs, the CEO of the Californian group announced that a new wave would take place in May.

“It’s been a difficult process, but once it’s over, I believe we’ll have a much more stable environment for our employees,” the founder said on a conference call with analysts. “We have really improved our cost structure over the past six months,” added Chief Financial Officer Susan Li.

AI first, metaverse second

To boost its revenues despite the macroeconomic difficulties, the Californian group is benefiting from its investments in artificial intelligence, which allow it to recommend to users videos shared by people they have not chosen to follow. “Since we launched Reels, AI-recommended videos have helped increase time spent on Instagram by 24%,” says the CEO.

Artificial intelligence is also helping the group circumvent restrictions imposed by Apple, which allows iPhone users to opt out of being tracked from app to app by companies like Meta. Using these tools, the Californian group manages to make the best use of the information at its disposal to adapt adverti*****ts to each user.

Its branch devoted to the construction of the metaverse – this virtual universe where users will be represented by avatars – appears however in bad shape: Reality Labs has lost 3.99 billion dollars in three months, after losses which reached 13.7 billion dollars in 2022. Its revenues have declined from a year ago to $339 million.

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