Apple’s Ios Update And The Weakening Economy Have Hurt Facebook’s Online Ad Business.
With four of the world’s most valuable tech companies and Meta all reporting their quarterly earnings results, it’s earnings palooza week for Big Tech companies.
During the first week of the event, we will see Google and Microsoft kick off the action on Tuesday, followed by Apple and Amazon on Thursday.
Between them is the Meta conference on Wednesday, which comes sandwiched between them.
Despite surging inflation, rising interest rates, and concerns of a recession, investors in all five names have been hit hard this year as a result of surging inflation, rising interest rates, and fear of a recession.
I believe that Meta has suffered the most among the mega-cap group, losing half its value despite Facebook’s struggling ad business yet to show indications that it will recover any time soon.
Apple’s Ios Update And The Weakening Economy Have Hurt Facebook’s Online Ad Business
During Meta’s second-quarter earnings report, Wall Street will be paying close attention to signs that growth is on the verge of returning when the company reports its results.
There is also a need for the company to see better trends when it comes to its users, who have abandoned the company’s apps in recent quarters in favor of their rivals, such as TikTok, due to the competition.
In the view of Debra Aho Williamson, an analyst at the research firm Insider Intelligence, “they are starting to get tired of it,” she stated.
There is no doubt that users are gravitating toward other platforms or there is a decrease in the amount of engagement with Facebook, and when you start seeing this trend in bigger and bigger quantities, that’s when advertisers start paying attention.
For the second quarter, analysts predict that Facebook will show its first year-over-year revenue decline in its history, and for the third quarter, analysts predict a mild acceleration with a growth rate in the mid-single digits. Heading into the report, the mood in the mobile ad industry appears to be dour.
As reported last week, Snap announced disappointing second-quarter results, missing on revenue and earnings in addition to announcing plans to slow hiring.
The company cited the difficult economy and Apple’s recent iOS privacy change as two significant hurdles to its success, along with competition from TikTok and others as other factors.
The analyst at Rosenblatt Securities, Barton Crockett, told CNBC that Snap and Meta were both on the same footing as far as revenue is concerned.
According to Crockett, who has a hold rating on both stocks, they are not growing, but they are not falling off a cliff right now either.
Compared to other social media apps, Snap is doing better from a user standpoint. According to the company, there are now 347 million daily active users of the app on a weekly basis, an increase of 18% year over year.
In the first quarter of this year, Facebook’s active users increased by 4% to 1.96 billion, and analysts expect that number to hold, according to FactSet, representing about a 3% growth from the same period last year.
According to Crockett, Snap is in a stronger position to grow in terms of users compared to Instagram.
Apple’s iOS update, which greatly affects the ability of advertisers to target users, has also affected Facebook’s ability to target users. In many ways, Facebook’s value to marketers is the ability to target its users across multiple sites and the ability to track them as they move from one site to another.
Due to Meta’s 50% fall in value over the past year, the company’s market cap has dipped under $500 billion, making it less valuable than Tesla, Berkshire Hathaway, and UnitedHealth, in addition to its Big Tech peers.
In 2022, Amazon’s stock price has dropped by 27 percent, Alphabet’s by 25%, Microsoft’s by 23 percent, and Apple’s by 13 percent.
When Meta reported its last set of results, it fell short of analysts’ expectations for revenue. As a result of the iOS change, and broader macro trends, like the softening of the e-commerce market after the acceleration that was seen during the pandemic, some of the challenges faced by Facebook have been due to the iOS change.
With the rise of TikTok, Facebook and Snap are facing a growing threat from the short video app, as TikTok is reeling in an increasing number of teenagers and young adults in its market.
At the same time, Meta continues to spend billions of dollars on the development of the metaverse, a digital world in people can access with the aid of virtual reality glasses and augmented reality glasses.
CCS Insight analyst Leo Gebbie believes that Meta is the leader in the still nascent metaverse market, according to research conducted by CCS Insight. A recent survey conducted by Gebbie’s firm about VR and AR found that the majority of people are most likely to associate Meta with the idea of the metaverse, underscoring the importance of the investments and marketing efforts Meta is making to market the concept.
However, there is still a long way to go before the metaverse becomes mainstream and generates profits in the future. According to Gebbie, he’ll be watching Zuckerberg’s earnings call closely in order to see whether he spends much time discussing the futuristic metaverse or if he concentrates on addressing Meta’s real-world challenges during the call.
“I think we’re going to see more efforts being made to tell the story that Meta is a sensible company in the future,” Gebbie added.
