Meta plans to steadily reduce headcount growth over the next year in the face of a downturn in its digital advertising business.
Expenses are getting closer scrutiny. Meta founder and CEO Mark Zuckerberg wants more done with fewer resources and he expects a stronger and more disciplined organisation to emerge.
Meta says advertising revenue growth slowed throughout the second quarter as advertiser demand softened.
The deceleration has been broad-based across verticals, and Meta believes businesses are lowering their advertising spend in response to increased economic uncertainty.
The total number of ad impressions in the June quarter increased 15% but the average price per ad fell 14%, driven by a reduction in advertiser demand.
In the June quarter, Meta's total revenue was down 1% to $US28.822 billion, below analyst expectations. Net income fell 37% to $US6.687 billion.
The weaker than expected results follows disappointing results, and warnings of weaker ad spend, from Snap, Twitter and Google’s parent Alphabet
Zuckerberg told a briefing of analysts: “We seem to have entered an economic downturn that will have a broad impact on the digital advertising business.
“And it's always hard to predict how deep or how long these cycles will be, but I'd say that the situation seems worse than it did a quarter ago.
“In this environment, we're focused on making the long-term investments that will position us to be stronger coming out of this downturn, including our work on our discovery engine and Reels, our new ads infrastructure and the metaverse.
“And we're also focused on being rigorous about measuring returns and sizing these investments correctly. “
Many teams at Meta are going to shrink.
Zuckerberg: “The fact that we hired a lot of people earlier this year means that our reported year-over-year headcount growth will still be substantial for the next few quarters, but it should continue to decline over time.
“Now this is a period that demands more intensity, and I expect us to get more done with fewer resources.”
Meta now has more than 3.6 billion people monthly across its services.
“Engagement trends on Facebook have generally been stronger than we anticipated, and strong real growth is continuing to drive engagement across Facebook and Instagram,” says Zuckerberg.
“We're currently going through the process of increasing the goals for many of our efforts. Previously challenging periods have been transformational for our company and helped us develop our next generation of leaders. And I expect this period to be no different. I expect that we're going to find a way to keep investing in our top priority areas.
“And I think we're going to come through this period as a stronger and more disciplined organisation.”
One big challenge is a loss from Apple's iOS changes.
“Our approach here is to grow first-party understanding of people's interests by making it easier for people to engage with businesses in our own apps, whether that's through business messaging, shops or new ad products," says Zuckerberg.
“For example, click to messaging as part of our business messaging strategy that's grown quickly with 40% of our advertisers already using this format. The AI wave that we are riding is a tailwind for all of these solutions.”
How long will the downturn last?
Meta’s CFO, Dave Wehner: We do know there's lots of things going on in the broader economy that point in that direction, including rate hikes and the like. So we do think there is a cyclical component of this.
“We know that advertising can be especially subject to these cyclical pressures. We do think that long term, digital within advertising continues to have a very positive future. And we think that we are positioned to continue to grow engagement nicely and build the best products in digital in the market.
“We're quite confident that as the market conditions improve, we'll continue to be able to return to nice levels of growth.”
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