Meta also warned that next year it expects operating losses for Reality Labs, the division that works on its virtual and augmented reality-based services, to grow “significantly year over year.”
On a slightly more positive note, the company reported that user growth numbers on Facebook and its other apps increased compared to the same quarter last year.
Meta’s mixed financial results come at a time when the social media giant faces a long list of macroeconomic threats to its underlying business model. The company faces increasing competition for ad dollars and users in the social media market from newer competitors like TikTok and Snapchat. And the targeted advertising methods that have made Meta an economic behemoth took a hit last year when Apple introduced new privacy restrictions that forced app makers to explicitly ask users if they could track their activity online — a request which was rejected by many.
Meta’s chief executive officer Mark Zuckerberg said Wednesday during a call with investors that the company will be able to address some of these challenges with its new product investments, including its decision to emulate the same artificial intelligence-based strategy that TikTok has made it so popular Show users fun content from strangers over posts from their friends and family members. The company is also promoting its short video product, Reels, on Instagram and Facebook, as well as new advertising opportunities for businesses in private messages.
Zuckerberg said people are playing reels on Facebook and Instagram 140 billion times a day, which he says is a 50% increase from six months ago. The social media CEO added that the company expects to be able to compete with Tiktok by serving users content from their social networks and offering them a steady stream of viral content from creators.
“We can mix this content with posts from your family and friends that AI alone can’t generate,” Zuckerberg said. “We’re building a flywheel between discovery and messaging that will make these apps stronger.”
By emphasizing Reels over users, Zuckerberg acknowledged that the company has seen a drop in revenue as the company still finds it harder to make money from the short-form video product than other products.
“We expect to get to a more neutral place in the next 10 or 12 to 18 months,” Zuckerberg said.
Zuckerberg also announced the company’s investment in a product that allows businesses to run ads on Facebook and Instagram that, when clicked, then start a message thread with the customer. According to the company, this service is on track to generate $9 billion in annual revenue.
After years of rising profits and seemingly endless success, the giants of Silicon Valley have been forced to manage their resources in an uncertain economic environment. Earlier this month, Meta executives announced they were implementing a hiring freeze. According to a memo posted on the company’s internal message board and viewed by The Washington Post, Meta told employees it would no longer post new offers to job applicants, screen candidates and approve internal transfers.
“Each organization leader works through their exact plans for the next year, but it’s important to pause recruiting and not add new people to teams while they do this work,” wrote Meta’s top human resources director, Lori Goler. “Providing this stability ensures that we don’t put people in roles that could change or disappear over the next year.”
Meta said Wednesday that some teams’ headcount would remain stable while other teams would shrink. The company also said it will increase headcount for its top priorities and that next year’s total headcount is likely to be very similar to its current level of 87,314.
Meanwhile, Meta is investing billions to create immersive virtual worlds known as the Metaverse that can be accessed through virtual and augmented reality. Meta executives, which rebranded from Facebook last year, believe people will want to work, play and shop in these digital worlds. Earlier this month, the company unveiled a new high-end headset powered by virtual reality technology for nearly $1,500.
Asked by an investor whether the company overemphasizes “experimental bets” versus products that have proven effective in generating revenue, Zuckerberg said no.
“There’s a difference between something being experimental and not knowing how good it will turn out,” he said. “But I think we’re pretty confident with a lot of things that we’re working on across the app family that they’re going to work and be good.”