Meta turns to Reels and the metaverse to recover from its first ever revenue loss

For the first time ever since going public in 2007, Meta (aka Facebook) reported a decline in quarterly revenue yr over yr. The corporate’s revenue used to be $28.82 billion — a 1% lower from $29.07 billion in the 2d quarter of 2021.

What’s worse, it forecasts that enlargement in the 1/3 quarter may just fall much more, in the vary of $26-28.5 billion.

Who’s to blame?

Meta attributes this to “the continuation of the weak advertising demand environment” they skilled all over the 2d quarter, which they consider “is being driven by the broader macroeconomic uncertainty.”

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In a Facebook post, Mark Zuckerberg additionally blamed Apple’s latest anti-tracking feature for iOS, which makes it tricky for Meta’s social platforms to attach their customers with third-party advertisements and content material.

Zuck’s three-step restoration scheme

While Zuckerberg famous that he can’t expect how lengthy the cycle of monetary downturn will remaining, he believes that the state of affairs “seems worse than it did a year ago.”

And, in fact, he has a heroic plan to save the day.

1.Keep firing

In June, Zuckerberg told staff in a weekly worker Q&A consultation {that a} hiring freeze is on the means, and declared a extra competitive efficiency control to weed out personnel not able to meet objectives.

“Realistically, there are probably a bunch of people at the company who shouldn’t be here,” he stated at the time.

Now Meta staff will want to face an excellent harsher fact. “Our plan is to steadily reduce headcount growth over the next year. This is a period that demands more intensity, and I expect us to get more done with fewer resources,” the CEO stated.

2. MORE Reels

Reels engagement is rising briefly, in accordance to Zuckerberg. Last quarter, It made up 20% of the time folks spent on Instagram, and this quarter, it noticed a 30% building up on each Instagram and Facebook.

He believes that Meta’s uninteresting transition to AI-powered advice programs (presently, 15% of Facebook suggestions are carried out via AI), will additional reinforce issues.

While Reels doesn’t monetize at the identical price as Feeds or Stories, the sooner it grows, the extra revenue it’ll convey.

As according to Zuckerberg, Reels’ monetization potency is rising sooner than anticipated, having crossed 1$ billion in annual revenue price from advertisements.

3. All in on the metaverse

The ace in Meta’s sleeve is unsurprisingly the metaverse.

“Given some of the product and business constraints we face now, I feel even more strongly now that developing these (metaverse) platforms will unlock hundreds of billions of dollars, if not trillions, over time,” he famous.

“This is obviously a very expensive undertaking over the next several years, but as the metaverse becomes more important in every part of how we live, I’m confident we’re going to be glad that we played an important role in building this.”

As a part of this objective, Meta will proceed to make bigger Horizon — its social metaverse platform — and will release a internet model to be had on all platforms later this yr.

That’s anticipated to “dramatically increase” the collection of folks the usage of Horizon (who will expectantly pay sufficient cash to customise and get dressed up their avatars).

Will this plan paintings?

Well, it’s exhausting to say, however I will’t lend a hand being skeptical about it.

Meta’s focal point on Reels turns out extra like a clear TikTok ripoff, than a real effort to introduce distinctive enticing options. It additionally turns out like a compelled choice for customers.

As according to Mike Proulx, VP major analyst at Forrester, “Meta is aggressively trying to monetize Reels which equates to essentially forcing it upon users — in an attempt to compete with TikTok.”

“Video posts under 15 seconds on Instagram will now be shared as Reels. Instagram has also been testing a new full-screen UI that mimics TikTok and emphasizes Reels in feed. A forced engagement strategy won’t bring Gen Z back to Meta’s platforms and could end up accelerating their exodus.”

As for the push in opposition to the metaverse, it’s no mattress of roses.

For instance, a recent study discovered that best 16% of folks perceive what the metaverse is.

Recent Forrester knowledge additionally confirmed that amongst on-line adults who’re conversant in the metaverse, 52% in the UK don’t need to take part if Meta’s working it.

According to Proulx, “every day consumers are currently skeptical of the metaverse, and this makes it that much more challenging for Meta to grow users of its Horizons platform to any significant scale in the near term.”

And whilst a rising collection of metaverse customers would possibly in the end opposite the revenue decline, the corporate’s transition from social media to the metaverse turns out a way from paying off.