Meta’s revenue down 1% in 2022, first since IPO

“2023 will be the year of efficiency”. Mark Zuckerberg has vowed to avoid quarterly results published on February 1, which close out a particularly difficult 2022 fiscal year. As a whole, during the year, the group’s turnover decreased by 1% to 116.6 billion, and its profit decreased by 41% to 23.2 billion. The company’s annual revenue has declined for the first year since its 2012 IPO.

Revenue in the quarter was $32.17 billion, down 4% compared to the same period in 2021. Its profits more than halved to $4.65 billion, including 11,000 layoffs and $4.2 billion in punishing costs related to the austerity plan (cancellation of various contracts and projects).

Optimistic stock markets

However, that didn’t stop it from recovering 19% after the close, with Q4 turnover beating analysts’ expectations. Rebound is associated with better-than-expected results, but also with the performance of Meta social networks. Indeed, the number of daily active users on Facebook reached 2 billion for the first time in Q4 (+16 million in three months). 3.74 billion people use social networks or group messaging (Facebook, Messenger, Instagram, WhatsApp) at least once a month. Meta also announced a $40 billion share buyback program.

Mark Zuckerberg also promised investors for 2023 “year of efficiency” in terms of organization chart. “We are determined to become a stronger and more flexible organization”he explained that it is very difficult to increase efficiency at a time when the workforce is growing very rapidly (they are growing by 20% in 2022, excluding planned layoffs).

What happens to the leader a “Adjusting its organizational structure and eliminating certain layers of middle management for faster decision-making”. He added that it would be meta “More proactive in terminating projects that do not meet requirements or are no longer a priority”. Efficiency will also come from less heavy investment than expected: $30-33 billion in 2023 instead of $34-37 billion thanks to less data center construction.

About 14 billion in losses for Reality Labs

Meta’s “metaverse” division, Reality Labs, announced a $13.7 billion loss in 2022, widening from a $10.2 billion loss in 2021. Its income is 2.16 billion (-5%). So expenses are more than six times revenue, which is less than 2% of Meta’s total revenue. This is no surprise and will continue for a long time, Meta is making significant investments to develop advanced technologies and related content to stay ahead of its competitors (Apple, Google) in the market.

Mark Zuckerberg confirmed it once again: investing in immersive technologies and the metaverse is his long-term strategic priority, and he expects to spend more on this activity in 2023. The head of Meta has big ambitions for the next generation of virtual reality headsets. will be released later in the year, and it will benefit from the same mixed reality features as the Quest Pro, a headset for professionals released last October.

Advertising activity is decreasing

Advertising activity, which still provides more than 97% of its revenue, is down 1% year over year. The activity is suffering from competition from TikTok, an economic situation that has reduced advertisers’ budgets, and the impact of Apple’s strategy of preventing its users from accessing target data.

Meta is hoping for two things to raise the bar: algorithmic recommendations to push content on Facebook and Instagram beyond the accounts users follow, and short videos, which it hopes will boost monetization. AI is really the way out of Meta, whether it’s a recommendation engine or to deliver targeted ads without the need for user data they no longer have access to.

In addition to these technical and competitive considerations, Meta also has to deal with low advertising rates. The group reports that the average cost per ad impression in Q4 fell 22% year-over-year. Those struggles in the ad market are also affecting Snap, which this week posted a 2022 loss of $1.43 billion, nearly triple that.