meta universe is also a money-burning black hole for Meta.
After the trading session on October 26, Eastern Time, Meta (Nasdaq:META), a parent company of Facebook (Facebook ), released its third-quarter 2022 financial report. During the reporting period, the company's revenue fell by 4% to US$27.714 billion. This is the second consecutive quarter that revenue declined year-on-year. The previous second quarter was the first time that Meta's revenue declined in history.
Meta's net profit in the third quarter was US$4.394 billion, a sharp drop of 52% year-on-year, down four consecutive quarters; earnings per share (EPS) was US$1.64, down 49% year-on-year, lower than analysts' expectations of US$1.98. "Wall Street Journal " said that in the past decade, Meta has never seen a decline in net profit for the fourth consecutive quarter.
Source: Meta
Core business Advertising revenue declined
Despite the double decline in revenue and net profit, Meta founder and CEO O Mark Zuckerberg (Mark Zuckerberg) still showed an optimistic attitude towards the future. He said on the conference call, "From what I have seen, the company's product trend looks good, and I am very confident that Meta will develop in a good direction." In terms of the number of users of
, the number of daily active users (DAUs) of Facebook increased in the third quarter, with increasing by 33% year-on-year to 1.98 billion; monthly active users (MAU) was 2.96 billion, a year-on-year increase of 2%. In terms of
application family, including Facebook, Instagram, Messenger, Whatsapp and other services, the application family achieved revenue of US$27.429 billion in the third quarter, a year-on-year decrease of 3.6%. Zuckerberg said that Instagram and Whatsapp both have more than 2 billion monthly active users, including Reels, a short video feature that mimics the TikTok mechanism, has 140 billion daily views on Facebook and Instagram, a 50% increase from six months ago.
advertising business still performed weakly, with revenue in the third quarter of US$27.237 billion, a year-on-year decrease of 3.7%. Advertising is Meta's pillar business, contributing 98.27% of total revenue. Among them, the ad impressions that measure the number of ads displayed to users increased by 17%, while the unit advertising price fell by 18%. Meta blames it for the Apple tracking transparency (APP tracking transparency) feature that prevents companies from tracking user data. David Wehner, chief financial officer of
Meta, said the impact of tracking transparency on Meta weakened in the third quarter, but surge in inflation and other factors, including the Russian-Ukrainian conflict, have caused weak advertising demand. The strengthening of the US dollar also has an impact, and if the exchange rate remains unchanged, advertising revenue should increase slightly.
Zuckerberg said Meta faces many challenges, such as economic headwinds, Apple's privacy policy and competition from software like TikTok. He said, "Meta will solve these problems at different times in the future. Those who are patient and invest in us will eventually get a return."
For the fourth quarter's performance guidance, Meta expects total revenue to be between $30 and $32.5 billion. Meta also expects total spending in 2022 to be between $85 and $87 billion, down from previous forecasts of $85 to $88 billion.
Yuan Universe business has lost $9.4 billion
In the third quarter, the Reality Labs of Meta Meta Universe Department (Reality Labs) has not yet achieved profitability, achieving revenue of $285 million, a year-on-year decrease of 48.9%, and the loss reached $3.672 billion. The department lost $2.96 billion and $2.802 billion in the first and second quarters respectively, and has accumulated losses of $9.4 billion this year, while it had lost more than $10 billion in 2021. David Wehner, chief financial officer of
Meta, said this was due to the decline in sales of Quest 2 headsets. According to a previous report by the Wall Street Journal, the retention rate of Quest headsets (i.e., the proportion of owners using the headset) has declined every year over the past three years, and more than half of Quest headset users will not continue to use the product after purchasing the product for 6 months.
Meta said it is expected that the losses of the Reality Laboratory will expand in 2023. Zuckerberg said on the conference call that Meta will increase its investment in the metacosmic project in 2023.
Zuckerberg said, "Obviously, the metaverse is the goal of our long-term efforts", and he said that long-term investment in the metaverse business "will eventually pay off."Zuckerberg acknowledged that part of the reason for developing the metaverse business is to have a platform in the future that can be protected from competitors such as Apple. But the main reason is that the Metaverse can provide more innovation for technology companies in building supporting computing platforms.
However, just this week, Altimeter Capital, one of Meta's long-time shareholders, raised dissatisfaction with the money-burning metaverse, and its CEO Brad Gerstner wrote a letter to Zuckerberg, hoping that Meta would limit investment in reality labs, preferably no more than $5 billion. Previously, Meta announced that it plans to invest about US$10 billion this year to develop meta-universe-related technologies.
In addition, Meta does not provide user data for the virtual world Horizon Worlds in the third quarter report. According to a previous report by the Wall Street Journal, Horizon Worlds has less than 200,000 monthly active users, far below the company's earlier target of 500,000.
It is worth noting that Meta announced a freeze in recruitment at the end of September, planning to fire employees and reorganize some teams in order to cut spending and adjust priorities.
Zuckerberg said that Meta's three core businesses in the future are the "discovery engine" of Reels functions, advertising and meta-universe. In 2023, companies will focus on prioritizing projects, which means some teams will face restructuring. It is expected that by the end of 2023, the size of the Meta will be the same as in the third quarter. As of September 30 this year, the number of Meta employees reached 87,300, an increase of 28% year-on-year.
As of October 26, US stock closed, Meta closed down 5.59% at US$129.82 per share, and fell nearly 20% after the market. Meta's stock price has fallen by more than 60% this year, and its market value has shrunk by more than US$550 billion. The Wall Street Journal pointed out that the decline in stock prices has caused Meta's market value to fall below $300 billion, the first time the social media giant's market value has fallen below this level since February 2016.
