Facebook in trouble about new investments.
The owner of Facebook and Instagram was hit by a drop in ad sales in the three months to July, which caused the first year-on-year drop in revenue in the firm’s history.
Meta’s total revenue fell 1 percent to 28.1 billion euros, but the company avoided a decline in users.
Analysts fear the company’s growth may have peaked after years of big profits.
Rivals like TikTok have eroded its popularity as more firms compete for ad spend.
Meta, which typically owns more than 20 percent of the global ad market, warned investors that ad sales are likely to fall again in coming months as e-commerce spending falls from its pandemic boom and companies are worried about inflation and the war in Ukraine.
Meta chief Mark Zuckerberg said the firm will reduce its hiring “steadily” over the next year, a response to the downturn and the company’s plans to shift investment into new areas, including its platform of virtual reality, Horizon, in a bet that so-called metaverse is its best prospect for growth.
Those plans have drawn attention from regulators, including the Federal Trade Commission, America’s consumer watchdog, which said it would sue to block Meta’s purchase of virtual reality fitness company Within Unlimited, which owns the Supernatural app. for monopoly concerns.
Any profits from those plans remain years away, with Meta’s struggle to grow its user base a sign of limited growth in the years ahead, said Angelo Zino, senior equity analyst at CFRA Research.
“It’s basically now become a low-growth or no-growth company,” he said. Earlier this year, Facebook reported its first ever decline in daily users.
In response, the company, which also owns WhatsApp, has recently shifted its algorithms on Instagram and Facebook to act more like TikTok, recommending posts to users outside of the base of accounts they follow.
The moves have drawn outrage from users, perhaps most notably celebrity Kylie Jenner, who shared a post with her more than 360 million Instagram followers this week saying “Make Instagram, Instagram again.” But changes can help.
Zuckerberg said the firm would continue to invest, albeit at a slower pace than planned.
“We face a number of challenges in the near term, but the investments we are making should give us…advantages in the long term,” he added.