Modern Marketing Data & Privacy Ecommerce

Facebook stumbles into first quarter as Meta - can it recover?

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By Chris Sutcliffe | Senior reporter

February 3, 2022 | 6 min read

Facebook’s daily user count dropped for the first time ever, according to its latest results, as it warned of a slowdown in advertising revenues. The news – and the implications for its wider business – caused its stock price to dramatically plummet as the company also missed key targets related to its pivot to the metaverse.

meta

Meta’s results have implications for its long-term advertising capabilities

In its results for the fourth quarter and full-year 2021, the company stated it expects its Q1 total revenue for the year to hit 3-11% year-over-year growth, to an amount of between $27bn-$29bn. It notes that its growth in the first quarter is set to be impacted by “headwinds to both impression and price growth“.

It said: “On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories.”

It is a tacit acknowledgment that the rise of dedicated social video apps like TikTok has changed the sort of social content users are looking to consume. As a result, Meta finds itself on the back foot when it comes to monetization options for a format it was late to the game with.

Consequently, it was hit by a combination of lower-value ad formats and changes initiated by rival Apple.

”We will lap a period in which Apple’s iOS changes were not in effect and we anticipate modestly increasing ad targeting and measurement headwinds from platform and regulatory changes.” It estimates that Apple’s ATT privacy changes will cost up to $10bn in revenue during 2022.

Its pivot to the metaverse also negatively impacted its results. Hardware development costs had an effect and the company ultimately disclosed more than $3bn in operating losses for its new Reality Labs business segment. That is despite its hard push for the new Horizon tools it offers through its Oculus (now Meta) Quest headsets.

Tamara Littleton, chief exec of The Social Element, said that Facebook now has to prove the metaverse is a compelling place for advertisers.

"Can it move ad dollars there? The company’s latest numbers show that the answer is still uncertain. Its ad business is still facing headwinds as it looks to mitigate Apple’s privacy changes and continues to battle governments and trolls alike to convince us that its platforms are safe for users and brands," she says.

”Yes, Meta may have come a long way since its dorm room origins as it bets on the long-term gains of the future, using its new bells and whistles as a distraction from these issues, but it needs to get the fundamentals right if it’s going to take over the virtual world too. Advertisers, and users, are inherently fickle – they will follow ROI and the latest trends respectively – so it needs to work quickly to prove that it is worth any form of investment.”

Meanwhile, its e-commerce proposition is also losing ground to rivals. Justin Biddle, UK lead at Shopware, says that it was once consiered "a pioneer of social media commerce" but the likes of TikTok are eating away at its margins.

"It recently upgraded its social commerce features giving advertisers more direct marketing and sales features and a less opaque display algorithm," he explains. "This has made it easier for brands to engage with their customers and drive traffic with an intent to shop from the app. Meta must be on the front foot to ensure it is differentiating itself from TikTok and continuing to deliver value to its commercial customers as this is at present its competitive advantage over the Chinese app that continues to nip at its heels.”

However, to put that shock ‘loses users’ headline in perspective, while Facebook did indeed lose daily users for the first time since at least 2009 and possibly ever, it still has 1.929 billion daily users, compared to 1.93 billion from the previous quarter. It’s a dip, undoubtedly, but there’s a long way to fall. Meta will be looking to use that extremely long tail of user decline to its core products to transition its ad businesses to the new format of the metaverse.

Modern Marketing Data & Privacy Ecommerce

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