Revenue below expectations, stocks rebound but uncertain future awaits Facebook

Meta had its first business update since its fourth-quarter 2021 report in early February, which marked the worst day for the company, as its capitalization suffered a 26% blow. Facebook’s daily active users, which fell for the first time in the last quarter of last year, rebounded slightly from 1.93 billion to 1.96 billion.

In addition to profits, Facebook also beat expectations in terms of average revenue per user. However, most other key metrics fell short of estimates, including monthly active users (2.94 billion versus Wall Street’s 2.97 billion forecast). In general, the company’s business situation is not much progress and it is unlikely to have a sudden change in the upcoming second quarter.

In the first quarter of this year, Facebook revenue grew 7%, lower than the forecast of 7.8%. This is the first time in 10 years since going public that the platform has seen growth below double digits. In the same period last year, Facebook posted a growth rate of 50% after the economy reopened after the pandemic.

Facebook forecasts that in the second quarter, the company’s revenue will reach between $28 billion and $30 billion, lower than the $30.6 billion forecast by analysts surveyed by Refinitiv. Meta said it has taken into account continued negative effects from the first quarter, such as the ongoing war in Ukraine.

At the business announcement meeting, CEO Mark Zuckerberg said that the company’s decline came from both internal and macro factors.

As for Facebook, the platform’s founder believes that focusing on video in the short term is a “revenue drag” because they don’t generate the same profits as the company’s traditional advertising services. Moreover, the platform is also dealing with changes to the privacy policy on iOS and “a slight slowdown in the e-commerce sector after accelerating during the pandemic”.

Similar to Snap and Google, Facebook is also negatively impacted by the Russia-Ukraine conflict.

“The company has been blocked in Russia and we have decided to stop accepting advertising contracts with Russian businesses globally,” Zuckerberg said. “The company also noted the impact on its global business since the outbreak of the war.”

Other social media platforms also point to the macro factors affecting their ad revenue. Evan Spiegel, Snap CEO, said the first quarter was “more challenging than the company expected”. Meanwhile, YouTube also only grew revenue by 14%, much lower than the 25% forecast by experts.

Not only that, Meta is also facing stricter regulations in the European market regarding the Digital Markets Act. Chief Operating Officer Sheryl Sandberg believes the regulatory environment will continue to be a “real challenge” not only for Facebook, but for the industry as a whole.

As of the end of the trading day on April 27, despite the occasional bounce, the share price of the world’s largest social networking platform is still losing ½ of its value in 2022.

Vinh Ngo (Synthetic)