Will Facebook’s Declining Revenue Make a Comeback?

In April, Meta said it might post a quarterly revenue decline for the first time in its history. Next week, we’ll see the results.

Meta may report its first-ever revenue decline when it releases its second-quarter earnings next week, a potentially stunning slowdown for a business that once seemed to have no ceiling.

Until last year, Meta reliably grew revenue by 20% or more each quarter, demonstrating formidable business strength even amid reputational chaos. But as a series of economic and competitive problems set in, the company’s revenue growth slowed significantly and may now disappear altogether. The contraction would punctuate an enduring, post-covid slide for Meta, whose share price has dropped 45% this year.

“This company is facing this perfect storm,” said Mark Mahaney, sr. managing director of internet research at Evercore ISI. “It has been for a while.”

The perfect storm Mahaney references includes: 1) Rising inflation, which cooled off the ad market. 2) A strengthening dollar, which diminished international revenue. 3) A new Meta content format in Reels, which it’s been slow to monetize. 4) Competition from TikTok, which makes money from that exact format. 5) The war in Ukraine, which ended Meta’s Russia business. And 6) Apple’s anti-tracking moves, which made it difficult for Meta’s advertisers to optimize their ads.

Meta may still turn in meager revenue growth next week, but it will be a far cry from its heyday, and many factors working against it are worsening. Mahaney, for instance, estimates international revenue issues — due to the strong dollar — could be a 2–4% impediment to growth alone. TikTok isn’t cooling off either. “TikTok’s ad revenue growth is up triple digits year over year,” Mahaney said. “That growth has got to be coming from somewhere.”

Related Article: TikTok’s Golden Opportunity

Declining Revenue, Returning Advertisers

For Meta, declining revenue could lead to cutbacks on ambitious projects throughout the company. Already, Mark Zuckerberg’s slashed hiring plans, ramped internal goals while encouraging voluntary exits and warned of economic disaster. “This might be one of the worst downturns that we’ve seen in recent history,” Zuckerberg told the company recently. In the ultra-competitive social media field, cutbacks can give competitors a lane to lay waste to your business.

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