Ad Sales Slowdown Hurts Facebook Owner Meta’s Profits

Mark Zuckerberg declared virtual reality the next frontier to drive Facebook’s growth a year ago. But there hasn’t been much of it so far. The company’s stock price has dropped, revenues are down, and profits are down.

On Wednesday, the company, now known as Meta, provided an update to investors on the three months that ended in September. Sales fell 4% year on year to $27.7 billion, while profits were cut in half.

The company, which also owns Instagram and WhatsApp, is struggling as businesses cut advertising budgets in the face of economic uncertainty, changes to Apple’s privacy settings reduce the effectiveness of its targeted ads, and competition from rivals such as TikTok heats up.

Zuckerberg, who founded Facebook while still in college nearly two decades ago, acknowledged the company faced “near-term challenges.”

He stated that the company’s goal was to become more efficient and hinted at job cuts, stating that the company may be a “smaller organization” next year.

“There are a lot of things going on right now in the business and in the world,” he said. “We’re going to resolve each of these things… I think those who are patient and invest with us will end up being rewarded.”

Investor confidence plummeted in February after the company revealed that it had lost daily users for the first time in its history. The company then reported its first quarterly revenue decline in July, as companies worried about the economy cut their advertising budgets.

The company’s stock is trading roughly 60% lower than it was at the start of the year, erasing hundreds of billions of dollars from its value.

They fell 15 per cent more in after-hours trading as executives warned that improvement would require an improvement in the broader economy.

Insider Intelligence analyst Debra Aho Williamson stated that the company was on “shaky legs when it comes to the current state of its business.”

“Mark Zuckerberg’s decision to focus his company on the future promise of the metaverse took his attention away from the unfortunate realities of today: Meta is under incredible pressure”.

Meta continues to generate large profits – nearly $4.4 billion in the three months ending in September – while also avoiding a user decline.

In the three months ending in September, 2.93 billion people were active on one of the company’s platforms on a daily basis, up from 2.88 billion the previous quarter. Although the core Facebook platform is not gaining users in the United States or Europe, it is expanding in other parts of the world.

Despite its strengths, many investors are concerned that the company has gone astray.

Sheryl Sanderg’s departure marked the “end of an era,” according to Zuckerberg.

“Meta has veered into excess — too many people, too many ideas, and too little urgency. When growth is easy, this lack of focus and fitness is hidden, but it is deadly when growth slows and technology changes “Altimeter Capital CEO Brad Gerstner told the firm in an open letter this week that the company should cut staff and reduce its investments in artificial intelligence and virtual reality, also known as the metaverse.

Facebook’s costs have risen in recent years as the company has faced questions about how it handles misinformation on its platform and protects user privacy.

The company stated that it was “making significant changes across the board to operate more efficiently” and that it intended to keep headcount flat for the next year.

That would be a significant shift after payrolls increased by 28 per cent % in the last year, from around 17,000 at the end of 2016 to more than 87,000.

However, it warned that losses in its Reality Labs unit, which works on virtual reality and has seen significant revenue declines, were likely to worsen.

Despite the skeptics, Zuckerberg said he remains committed to the project.

“I get that a lot of people might disagree with this investment but from what I can tell I think this is going to be a very important thing,” he said.

(Adapted from

Categories: Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy, Sustainability

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