Facebook suffers first ever fall in revenues as advertising slows


Mr Zuckerberg, 38, bet big on the metaverse last year in an effort to return the company to growth. His vision is of a world where the virtual and physical worlds combine through virtual reality, augmented reality and social media.  

However, that ambition has been hard to define and Meta’s share price has crumbled 50pc so far this year. Its virtual reality division Reality Labs division lost $2.8bn in the second quarter.

The company’s metaverse expansion is also attracting scrutiny from regulators. On Wednesday, the US Federal Trade Commission filed an injunction to block Meta’s purchase of Within, a virtual reality company, and accused Mr Zuckerberg of an “illegal acquisition to expand [Meta’s] virtual reality empire”. Meta claimed the regulator’s complaint was based on “ideology and speculation”. 

The social media company, which rebranded in an effort to stake a claim as the leading company in the so-called metaverse, has struggled to maintain interest in its original Facebook app and faced criticism over the mental health impact of its photo sharing app Instagram. It has also faced pressure from the huge popularity of Chinese video sharing app TikTok. 

Revenues from its WhatsApp messaging app and virtual reality division, which manufactures the Quest virtual reality goggles, have never rivalled its bigger social media brands.  

Meta’s Facebook, Messenger, Instagram and WhatsApp apps are used by over 3.6bn people each month, with revenues primarily driven by digital advertising.  

But that advertising business has come under pressure from a slowdown in marketing spending as brands slash ad budgets to cope with rising costs and an economic slowdown. 

Digital advertising has also been rocked by changes to Apple’s iOS software on iPhones, which has made it easier for consumers to switch off advertising tracking. Mr Zuckerberg has told staff he expects Apple to be a “very deep competitor” to its metaverse ambitions.  

Mr Zuckerberg has issued demands for increased productivity and performance at the Silicon Valley company in response to the slowdown. 

In a call on June 30, Mr Zuckerberg told staff he was keen to weed out underperformers, The Verge reported. He said: “Realistically, there are probably a bunch of people at the company who shouldn’t be here.  

“And part of my hope by raising expectations and having more aggressive goals, and just kind of turning up the heat a little, is that I think some of you might say this place isn’t for you. And that self-selection is okay with me.” 

Meta’s headcount has swelled in the last three years from 48,000 to close to 83,000 people. Mr Zuckerberg has told staff that hiring will be frozen for low priority projects, while engineering hiring would be cut by 30pc this year. 

The company’s Instagram product, for a long time the key driver behind its growth, was also plunged into an identity crisis this week after some of its most popular celebrity users, including Kylie Jenner, criticised the app’s design changes. 

Users have grown frustrated by Instagram’s attempts to mimic Chinese rival TikTok, emphasising videos rather than static pictures. Adam Mosseri, the head of Instagram, admitted that some of the app’s changes were “not yet good” but insisted that “more and more of Instagram is going to become video over time”. 

Meta’s results come amid a wider downturn among technology stocks, in particular advertising technology companies. 

Shares in Snap, which develops the Snapchat app, plunged 25pc last week after the company said it expected further headwinds in the advertising market.  

On Tuesday, Google-parent company Alphabet reported its profits had slipped as it suffered its slowest quarterly sales growth in two years.



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