As Zuckerberg bets on TikTok-style videos, Meta heads for first-ever revenue drop

By Katie Paul

(Reuters) – Meta’s future could lie within the metaverse, however when the corporate experiences outcomes on Wednesday, traders will probably be centered on two extra quick bets: pumping up short-video providing Reels to compete with TikTok and rebuilding its advertisements system after Apple throttled entry to consumer knowledge.

Chief Govt Mark Zuckerberg believes that may take time, and that the corporate wants to hurry up the method, he instructed staffers on a name late final month. The dialogue hit on key points that will probably be watched in Meta’s quarterly outcomes launch on Wednesday.

Meta is anticipated to report its first-ever income drop in its historical past as a public firm, down 0.4% to about $29 billion, based on IBES knowledge from Refinitiv.

Buyers are additionally bracing for flat consumer development and a 3rd consecutive quarter of revenue declines and are anticipating indicators of {hardware} undertaking cuts and slower hiring to handle prices.

The social media large this yr has unveiled sweeping redesigns of Fb and Instagram, imitating rival TikTok’s look and algorithmically pushed suggestions of viral brief movies.

Meta can also be investing closely to rebuild its advertisements system round its personal consumer knowledge, after privateness modifications launched final yr by Apple degraded Meta’s advert focusing on capabilities.

Zuckerberg instructed staff on the decision, which occurred on June 30, that Reels represented a “big alternative” for Meta, but in addition famous that the format was “nonetheless solely round 15% of the scale of TikTok.”

“I feel realistically we’re a yr and a half, possibly even longer, earlier than we’ll actually have a line of sight to having a robust management place,” he mentioned.

The timeline for rebuilding the advertisements system was comparable, he mentioned. He repeatedly urged workers to extend their “depth” to get via the interval.

Whereas Meta has the strongest first-party consumer knowledge within the business, it additionally “has plenty of credibility to revive earlier than traders can get comfy with sustaining its management place in digital promoting’s secular development,” analysts from RBC Capital Markets wrote.

Zuckerberg instructed staff that the financial system had worsened since executives first deliberate the Reels and advert modifications, and outlined plans to expedite the transitions so earnings from the core enterprise might fund Meta’s long-term metaverse bets.

“Our job is mainly to usher in as a lot of the enterprise that could be three years out into two years out, or one and a half years out, whereas additionally pushing on issues like bills and price development,” he mentioned.

If wanted, he added, his inclination was to “take extra ache by way of a bit bit much less profitability” within the brief time period, moderately than reducing again on “funding for future stuff.”

The modifications have created some backlash, although.

Instagram, which has been testing TikTok-like options, final week postponed plans to exchange the app’s scrolling feed with a extra immersive “panavision”-style format that fills the complete display, from October to early subsequent yr.

A Meta spokesperson mentioned the corporate acknowledges “that modifications to the app might be an adjustment, and we wish to take the time to ensure we get this proper.”

On Monday, two of Instagram’s largest customers, Kim Kardashian and Kylie Jenner, each shared a meme imploring the corporate to “Make Instagram Instagram once more.”

“Cease attempting to be TikTok I simply wish to see cute pictures of my buddies,” the submit mentioned. It signed off: “Sincerely, everybody.”

Instagram head Adam Mosseri acknowledged the criticism in a video on Tuesday, saying the format was “not but good” and the corporate must “get it to a superb place if we will ship it” to all Instagram customers.

The corporate would proceed doing checks and shifting towards video nevertheless, he added.

(Reporting by Katie Paul in Palo Alto, Calif.; Enhancing by Peter Henderson and Lisa Shumaker)