In a bid to quickly stem the decline, Mr. Zuckerberg is attempting to overhaul almost every aspect of the social media platform’s operations, from the content presented to users to the delivery of digital advertising and a greater focus on video content. It all adds up to one of the biggest changes for the company in years, analysts say.
“Meta is at an inflection point – what once seemed untouchable is showing cracks,” said Daniel Newman, a senior analyst at Futurum Research. “Meta has big problems to solve, and as in the past, it must move quickly to address them while grappling with some of the toughest competition it has ever faced.”
Facebook, as Meta was called before it was renamed last year, has been through turbulence before. But adding to Mr. Zuckerberg’s challenge is the economic backdrop against which this transformation is taking place. Rising inflation is weighing on adspend and there is fierce competition between platforms for adspend. Ad prices, which Meta calculates fell 8% in the first quarter, fell 14% from April to June, the company said on Wednesday when it released quarterly results. A year ago, the company reported a 47% year-over-year increase in the average price per ad.
Mr. Zuckerberg said on a conference call on the results on Wednesday, “We are focused on making long-term investments that will strengthen us to emerge stronger from this downturn.”
Shares of Meta are down more than 7% in Thursday morning trading. The stock is down more than 50% this year, taking about $500 billion off its market valuation.
The company also faces stiff competition. TikTok, the Chinese-owned social media service, surpassed 1 billion monthly active users in September 2021, and its usage surpassed that of Meta’s Instagram among teenagers in November 2021, according to Forrester Research Inc.
To fight back, in August 2020, Meta launched Reels — a short-form video service not unlike TikTok — for US Instagram users. More recently, Mr. Zuckerberg said in April that Facebook and Instagram were more actively using artificial intelligence to recommend content to users from accounts they aren’t already following. It’s a drastic departure from the traditional way Facebook and Instagram work, which is to show users content from their friends, family, or the accounts they follow. Using an algorithm to determine which content a user is most likely to engage with is perhaps TikTok’s most distinctive feature.
This was followed in May by an announcement from Instagram boss Adam Mosseri, who said the service would begin testing to show users photos and videos in full-screen, similar to the layout of the TikTok app.
Mr. Zuckerberg said the changes show promising early returns. On Wednesday, Mr. Zuckerberg said that Meta saw a 30% increase in the time users spent on Reels over the past three months. He added that nearly one in six posts on users’ Instagram and Facebook feeds come from accounts that users don’t follow and are based on AI recommendations. That number will increase to every third post by the end of 2023, he said.
“I think we’re on the right track here and we just have to see this one through,” Mr. Zuckerberg said.
Google, Meta and ByteDance are in a battle for supremacy in the short video format. WSJ’s Miles Kruppa breaks down how each company is doing and offers insights into which platform could come out on top. Figure: Ryan Trefes
But the changes have also caused a popular revolt among some high-profile users. This week, more than 2 million Instagram users liked a post that read “Make Instagram Instagram Again” and “Stop trying to be Tiktok I just want to see cute photos of my friends.” Among users who liked the post shared were influential celebrities Kylie Jenner and Kim Kardashian.
“I have to be honest. I believe more of Instagram will shift to video over time,” Mr Mosseri said on Tuesday.
Addressing the backlash on the call, Mr Zuckerberg said users would continue to see content from their friends, but insisted the changes would improve Facebook and Instagram.
The social media giant has navigated tough times before. As it prepared to go public in 2012, Facebook, then still largely accessible via PCs, posed to Wall Street how it would handle the consumer switch to mobile. The company responded by buying Instagram for $1 billion and revamping its mobile apps.
Facebook found itself in a similar quagmire in 2016 when it was embroiled in a fierce rivalry with Snap Inc., the maker of Snapchat. The company responded by launching Instagram Stories, a rival of its competitor’s most notable feature.
Mr. Zuckerberg will drive the latest transformation without any of his closest compatriots. Sheryl Sandberg, who is credited with helping make Facebook the advertising juggernaut it has become, is leaving the company and was at her last meta earnings call on Wednesday.
Meta is also trying to force change while tightening his belt. The company lowered its guidance for this year’s spending to $85-88 billion from an earlier forecast of $87-92 billion. The company will also reduce its hiring rate, he said, as some teams are downsizing. “This is a time that requires more intensity, and I expect we’ll do more with fewer resources,” Zuckerberg said.
The co-founder unveiled new plans for the company last year when he rebranded it as Meta, primarily around the push to embrace what it called the Metaverse, an emerging, more immersive vision of the internet where people would interact. “I still believe these projects are important, but given the newer revenue curve that we’re seeing, we’re slowing the pace of these investments and pushing down a bit on some expenses that would have been incurred over the next year or two on a longer time frame” , he said on the conference call.
“Previous challenging times have been transformative for our company and have helped us develop our next generation of leaders, and I expect this time will be no different,” Mr. Zuckerberg said.
write to Salvador Rodriguez at [email protected]
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