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Meta Platforms Inc., which was previously known as Facebook, delivered record fourth quarter revenues of $33.7 billion, and annual revenues of $118 billion Wednesday. But it missed Wall Street expectations, sending the stock plunging nearly 20 percent after hours.
Even as its daily active users rose by 5 percent to 1.93 billion year over year, that growth was the slowest in recent memory, and the company warned that the rest of the year is shaping up to be a choppy one as it deals with “macroeconomic challenges” and continues its long-term strategic shift “towards building the metaverse,” per CEO Mark Zuckerberg.
Outlining the company’s priorities on an earnings call Wednesday, Zuckerberg said, “2022 is the first page for the next chapter for our company,”
As it relates to the metaverse, Zuckerberg said that “we are focused on the foundational hardware and software that is required to build an immersive internet,” but noted that 2022 is still early days, and won’t see any major updates to the metaverse strategy.
Instead, he cited shortform video as a 2022 priority, specifically citing the success of Facebook’s TikTok-esque offering Reels. “It is clear that shortform video will be an increasing part of how people consume video going forward,” Zuckerberg said, adding that the company plans to adjust its news feed and stories to emphasize short videos. “Reels and shortform video overall are very engaging. It is growing very quickly, it is already the biggest contributor to engagement growth on Instagram.”
“People have a lot of choices for how they want to spend their time, and apps like TikTok are growing very quickly,” he said, adding that the shift to shortform video will impact the company’s ad business. “TikTok is so big a competitor already, and also continues to grow at a very fast rate off of a very large base.”
“While we are going through a transition, we are optimistic,” COO Sheryl Sandberg added, citing the shift to mobile, and the move from newsfeed to stories. “We have made successful transitions before. We have a playbook here.”
“Our ad system and service are not tuned to the new formats,” Zuckerberg added, noting it creates a “near-term headwind” but should clear in the medium term.
Meta CFO David Wehner warned that its business would be impacted on both the impressions and the pricing side. “We expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” Wehner wrote.
And on the pricing side, Apple iOS advertising changes and foreign currency fluctuations will impact revenue. “We’re hearing from advertisers that macroeconomic challenges like cost inflation and supply chain disruptions are impacting advertiser budgets,” Wehner wrote.
The company outlined its strategy in its last earnings call, announcing a $10 billion commitment to building the metaverse, and a refocusing on younger users amid competition from companies like TikTok. The company rebranded as Meta Platforms Inc. later that month, and revealed plans to change how it reports earnings to focus on its “family of apps,” including Facebook and Instagram, and “reality labs,” which includes its virtual and augmented reality businesses.
“It has been exciting to see lots of other companies share their plans for the metaverse, and I look forward to working forward with many of them,” Zuckerberg said Wednesday.
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