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Meta turns to Reels and the metaverse to recover from his first-ever revenue loss

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For the first time since its IPO in 2007, Meta (aka Facebook) reported a decline in quarterly sales on an annual basis. The company’s revenue was $28.82 billion – a decrease of 1% from $29.07 billion in the second quarter of 2021.

Worse, it predicts that growth could fall even more in the third quarter, on the order of $26-28.5 billion.

Who is to blame?

Meta attributes this to “the continuation of the weak ad demand environment” they experienced during the second quarter, which they say is “driven by the broader macroeconomic uncertainty.”

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In a Facebook postalso blamed Mark Zuckerberg Apple’s latest anti-tracking feature for iOS, which makes it difficult for Meta’s social platforms to connect their users with third-party ads and content.

Zuck’s three-step recovery plan

While Zuckerberg noted that he cannot predict how long the economic downturn cycle will last, he believes the situation “seems worse than a year ago.”

And, of course, he has a heroic plan to save the day.

1.Keep firing

In June, Zuckerberg told employees in a weekly employee Q&A session that a staff shutdown is imminent, and announced more aggressive performance management to eliminate staff unable to meet targets.

“Realistically, there are probably a lot of people at the company who shouldn’t be here,” he said at the time.

Now Meta employees will have to face an even harsher reality. “Our plan is to steadily reduce workforce growth over the coming year. This is a period that requires more intensity, and I expect we will get more done with fewer resources,” said the CEO.

2. MORE rinsing

Role engagement is growing rapidly, according to Zuckerberg. Last quarter it was 20% of the time people spent on Instagram, and this quarter saw a 30% increase on both Instagram and Facebook.

He believes Meta’s tedious transition to AI-powered recommendation systems (currently 15% of Facebook recommendations are made by AI) will further improve things.

While Reels doesn’t monetize at the same rate as feeds or stories, the faster it grows, the more revenue it will generate.

According to Zuckerberg, Reels’ monetization efficiency is growing faster than expected, with $1 billion in annual advertising revenue.

3. All in on the metaverse

The ace in Meta’s sleeve is unsurprisingly the metaverse.

“Given some of the product and business limitations we are now facing, I now feel even more strongly that developing these (metaverse) platforms will unlock hundreds of billions of dollars, if not trillions, over time,” noted. he up.

“Obviously this is going to be a very expensive undertaking in the coming years, but as the metaverse becomes more important in every part of how we live, I’m confident we’ll be glad we played a significant role in building it. ”

As part of this goal, Meta Horizon – its social metaverse platform – will continue to expand and launch a web version later this year that will be available on all platforms.

That is expected to “drasically increase” the number of people using Horizon (who will hopefully pay enough money to customize and dress up their avatars).

Will this plan work?

Well, it’s hard to say, but I can’t help but be skeptical about it.

Meta’s focus on Reels is more like a transparent TikTok ripoff than an actual attempt to introduce uniquely compelling features. It also seems like a forced option for users.

According to Mike Proulx, VP Principal Analyst at Forrester“Meta is aggressively trying to monetize reels, which is essentially pushing users over – in an effort to compete with TikTok.”

“Video posts of less than 15 seconds on Instagram are now shared as roles. Instagram also tested a new full-screen UI that mimics TikTok and emphasizes Reels in feed. A forced engagement strategy will not bring Gen Z back to Meta’s platforms and could accelerate their exodus.”

As for the push to the metaverse, it’s not a rosary.

For example, a recent research found that only 16% of people understand what the metaverse is.

Recent Forrester data also showed that among online adults familiar with the metaverse, 52% in the UK don’t want to participate if Meta runs it.

According to Proulx, “every day consumers are currently skeptical of the metaverse, and this makes it a much more challenging challenge for Meta to grow users of its Horizons platform to significant scale in the near term.”

And while a growing number of metaverse users may eventually reverse the decline in revenue, the company’s transition from social media to the metaverse doesn’t seem to be paying off yet.

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