By James Titcomb
October 26, 2023 — 9.58am
Mark Zuckerberg’s Meta has unveiled its strongest growth in two years as the social networking giant bounced back from its ill-fated bet on the metaverse with an advertising blitz.
But the owner of Facebook, Instagram and WhatsApp warned its advertising business depends heavily on the macroeconomic environment for spending, sending its shares down 3 per cent in after-hours trading despite the upbeat earnings report.
“The revenue outlook is uncertain” for 2024, Chief Financial Officer Susan Li said on a call with investors. “We are very subject to volatility in the macro landscape.”
It’s been a good quarter for Meta chief Mark Zuckerberg, but the outlook is uncertain.Credit: Bloomberg
Meta had appeared to recover from struggles in its ad business that began last year. Third-quarter sales were up 23 per cent to $34.2 billion, the company said after the close of trading on Wednesday (Thursday morning AEDT], compared with the average analyst estimate of $US33.5 billion. It was the fastest growth since the third quarter of 2021 and the strongest results since Zuckerberg rebranded the company from Facebook to Meta almost two years ago.
Profits more than doubled to $US11.6 billion after the company laid off almost a quarter of its workers over the past year, while the number of people using its services each month rose by 7 per cent to 3.96 billion, putting it on track to hit its 4 billion user milestone in the coming weeks.
Zuckerberg staked his company’s future on the metaverse in 2021, predicting that human interaction would move to virtual worlds. The push has cost the company billions in research and development at the same time as a post-pandemic advertising slump hit revenues and changes to the iPhone made it more difficult to target advertisements.
However, the company has squeezed more ads into its services thanks to the rise of features such as Reels, the company’s answer to TikTok. The number of ads it showed to users has increased 31 per cent in the last year, in part due to the growing popularity of its short-form video format.
Zuckerberg has cut tens of thousands of jobs and declared a “year of efficiency” in an attempt to win back the support of shareholders. Meta’s headcount has shrunk by 24 per cent since last year and now stands at 66,185. Meta said it had “substantially completed” the layoffs.
Threads, Meta’s attempt to exploit growing disquiet with Elon Musk’s ownership of Twitter with a rival app, has stuttered after a strong start, although the company has said it is committed to the service.
Its Reality Labs division, focused on metaverse technologies such as virtual reality, saw a 26 per cent drop in sales. The division has lost $US11.5 billion this year.
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The figures come a day after Meta was sued by prosecutors from 41 US states over claims it had intentionally hooked children to its services.
The states said the company had “designed psychologically manipulative product features to induce young users’ compulsive and extended use” of its services.
Meta said in response to the case it was disappointed that instead of working productively with companies across the industry to create clear, age-appropriate standards for the many apps teens use, the attorneys general have chosen this path”.
Zuckerberg has looked to capitalise on the artificial intelligence boom, recently unveiling a set of chatbots played by celebrities such as Snoop Dogg and Paris Hilton that users can talk to.
The Telegraph, UK, with Bloomberg
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