In the call with investors, Zuckerberg said the advertising downturn underscores the importance of shifting to the metaverse – which will create a platform that Meta controls entirely. “It will be hoping that its efforts to create a more frictionless commerce experience on the platform will compensate for this over time.” “Apple’s iOS privacy changes mean that Meta has lost some of the rich data tracking that powers its ad business,” said Tom Johnson, global chief digital officer at market analysis firm Mindshare Worldwide. The company allowed users to opt out of digital tracking, torpedoing Facebook advertising revenue, and the company revealed in its second quarter report that the average price per ad had dropped 14%. Zuckerberg repeatedly stressed the massive impact of Apple’s 2021 change to its operating system. “Obviously, there is a cannibalistic impact, but the net impact is positive.” “In the near term, the faster that Reels grows, the more revenue that actually displaces from higher-monetizing surfaces,” he said. However, those videos do not monetize at the same rate as traditional content, Zuckerberg said on the call, and will take time to stabilize. Meta reported a 30% increase in time spent on Reels, its copy of rival TikTok, across Instagram and Facebook. The company has attempted to stop young users from fleeing its platforms by bolstering its short-form video content. In addition to the broader economic downturn, Meta faces a string of unique challenges to its business, including stiff competition from TikTok and Amazon for ads and a revenue hit from Apple’s privacy changes to its mobile operating system iOS.
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Tech firms are also struggling to maintain booming growth seen during the pandemic, which bolstered online activity as more people quarantined at home.
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Meta’s earnings further underscored an inflation-induced slowdown in the digital ad industry, which has been booming for decades as companies tapped the power of the internet to reach consumers. Meta shares fell nearly 5% in after hours trading following the rare backslide.
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“The situation seems worse than it did a quarter ago.”įor the second quarter ending 30 June, Meta said total revenue, the bulk of which comes from ads, fell to $28.82bn from $29.08bn a year earlier. “We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” chief executive officer Mark Zuckerberg said on a call with investors on Wednesday. It also follows difficult earnings from other tech firms including Snap, Twitter and Netflix, as fears of a recession grow. The disappointing results come as the company faces a generally weak ad market and pushes a complete overhaul of its brand, pivoting from its core social media product to offerings in virtual reality in 2021.