What's going on?
Meta posted a steeper-than-expected drop in both quarterly revenue and profit late on Wednesday.
What does this mean?
After bleak results from fellow social media giants Snap and Twitter late last week, investors were worried that the same fate awaited Meta. They were right to be nervous: Meta’s monthly active users might’ve risen marginally across all its platforms from the same time in 2021, but more eyeballs isn’t translating into more advertising revenue. That’ll happen as companies slash budgets left, right, and center, and as Apple’s privacy updates continue to impair Meta’s ability to target the right products to the right users. That might be why the company’s profit and revenue came as such a disappointment, and why it gave a much weaker-than-expected outlook for this quarter too.
Why should I care?
Zooming in: Meta sees you.
At least Meta is working hard to boost growth. First, it said this week that it would be introducing music revenue-sharing on Facebook, which will allow creators to make money from videos that use licensed music. That should lure more users to the platform and help it compete with Chinese nemesis TikTok. And second, the company is reportedly thinking about buying eye-tracking technology firm AdHawk Microsystems. That would allow it to improve its VR headset offering, which will be vital if it’s going to make good on its push into the metaverse.
The bigger picture: The Fed nears the tipping point.
Meta warned investors about “macroeconomic uncertainty” ahead, and it has a point: the Federal Reserve (the Fed) hiked interest rates by 0.75% for the second-straight time on Wednesday. That takes them close to the “long-run neutral rate” – a level estimated to neither stimulate nor restrict economic growth. But since the Fed has already indicated that it won’t stop hiking until inflation is inarguably on the way back down, it might not be long before that neutral rate is a distant memory.