Facebook suffered a drop in revenue in its Q2 earnings report
“I want to make it clear that we are still ultimately a social enterprise focused on helping people connect,” Zuckerberg said on a call with investors.
The statement comes as Facebook’s parent company Meta suffered the first quarterly revenue drop in a decade for the publicly traded company. And Zuckerberg’s comments shed light on the company’s near-term survival strategy as it faces unprecedented macroeconomic challenges as well as specific threats to its business model.
Facebook executives have warned marketers are cutting spending in part because of an uncertain economic environment, leading some experts to warn that a recession could be on the horizon. Meanwhile, the company faces increasing competition for advertising dollars and users in the social media market from upstart apps such as TikTok and Snapchat. Facebook shares fell in the secondary market.
Zuckerberg’s rosy image of the future of communicating about his services comes as the company invests in replicating the formula that got TikTok off the ground with younger users. Last week, the company announced a revamp of its flagship social network, designed to elevate entertaining content from strangers over posts from friends and family.
Instagram has also started recommending short videos, called Reels, in users’ feeds, as well as photos and videos of people they know. These changes have sparked a slew of criticism in recent days, including a protest from Kylie Jenner, Kim Kardashian and other high-profile influencers, sharing an image declaring, “Remaking Instagram Instagram.”
Appearing to respond to criticism, Zuckerberg said the company still intended to create spaces for social connection, but also needed to adapt to the way people communicate on social media. Instead of interacting in comments on their feeds, users are more likely to private message their friends, according to Zuckerberg. Reels account for more than half of the content re-shared in posts on Instagram, he said.
“It creates this flywheel of discovery, and then social connection, and then inspires those people to create more content themselves,” Zuckerberg said, touting the company’s continued investment in Reels, which he says, is on track to generate at least $1 billion in annual revenue. .
In a glimmer of hope, Facebook reported that the number of daily active users on its main social network rose 3% to 1.97 billion in the second quarter. Monthly users also grew by about 1% to 2.93 billion, the company said.
Still, Zuckerberg and other executives pointed to looming financial challenges, including the continued impact of Apple’s new privacy rules, which seek to limit app makers’ ability to collect user data to power their targeted advertising activity.
Over the past few weeks, Facebook executives have issued a dizzying array of guidelines, outlining a new era of higher performance expectations and slowing hiring as the company emerges from the pandemic with a growing list of economic challenges. Facebook said Wednesday it plans to cut spending and cut hiring this year.
Long term, Zuckerberg said Facebook will continue to invest in building the so-called metaverse, a place where the company envisions people will want to work, play and shop.
The metaverse “will enable deeper social experiences, where you’ll feel a realistic sense of presence with other people, no matter where they are,” Zuckerberg said.
The Federal Trade Commission sued the company on Wednesday to block its acquisition of Within, the maker of popular virtual reality games. The FTC argued that the deal would mean “Meta would be one step closer to its ultimate goal of owning the entire ‘Metaverse’.”
Facebook also announced a reshuffle among its top executives on Wednesday. Facebook CFO David Wehner will take on a newly created role as Chief Strategy Officer. Susan Li, the company’s current vice president of finance, will become the new chief financial officer. Facebook Chief Operating Officer Sheryl Sandberg announced last month that she would step down after 14 years.