First ever drop in revenue for Facebook

Mark Zuckerberg’s social media empire warns of ‘weak advertising demand’ as it cuts spending plans

Mark Zuckerberg’s social media empire has suffered the first drop in revenues in its history and warned of budget cuts after being hammered by an advertising slump. Meta, which was known as Facebook until last year, said last night that revenues fell to $28.8billion (£23.7billion) in the three months ending in June, down from $29billion the previous year. The fall brings an end to 18 years of growth for the company Mr Zuckberg originally conceived in his Harvard dorm room.

MARK ZUCKERBERG’S social media empire has suffered the first drop in revenues in its history and warned of budget cuts after being hammered by an advertising slump.

Meta, which was known as Facebook until last year, said last night that revenues fell to $28.8bn (£23.7bn) in the three months ending in June, down from $29bn the previous year.

The decline brings an end to 18 years of growth for the company Mr Zuckberg originally conceived in his Harvard dorm room.

User numbers were up slightly in the second quarter, increasing 4pc compared with the previous year, but profits slumped as net income fell from $10.3bn to $6.7bn.

Meta blamed “weak advertising demand” and said it would cut back on hiring and slash spending plans, with problems expected to persist in the second half of the year.

Mr Zuckerberg, Meta chief executive, said: “We’re putting increased energy and focus around our key company priorities that unlock both near and long-term opportunities for Meta and the people and businesses that use our service.”

Shares dipped 3pc in after-hours trading. The stock lost around a third of its value in April after posting a fall in quarterly profits and slowing revenue growth.

Mr Zuckerberg, 38, bet big on the metaverse last year in an effort to return the company to growth. His vision is of a world where the virtual and physical worlds combine through virtual reality, augmented reality and social media.

However, that ambition has been hard to define and Meta’s share price has crumbled 50pc so far this year. Its virtual reality division Reality Labs lost $2.8bn in the second quarter.

The company’s metaverse expansion is also attracting scrutiny from regulators. The US Federal Trade Commission yesterday filed an injunction to block Meta’s purchase of Within, a virtual reality company, and accused Mr Zuckerberg of an “illegal acquisition to expand [Meta’s] virtual reality empire”. Meta claimed the regulator’s complaint was based on “ideology and speculation”.

The social media company, which rebranded in an effort to stake a claim as the leading company in the so-called metaverse, has struggled to maintain interest in its original Facebook app and faced criticism over the mental health impact of its photo sharing app Instagram. It has also faced pressure from the huge popularity of Chinese video sharing app Tiktok.

Revenues from its Whatsapp messaging app and virtual reality division, which manufactures the Quest virtual reality goggles, have never rivalled its bigger social media brands.

Meta’s Facebook, Messenger, Instagram and Whatsapp apps are used by more than 3.6bn people each month, with revenues primarily driven by digital advertising.

But that advertising business has come under pressure from a slowdown in marketing spending as brands slash advertising budgets to cope with rising costs and an economic slowdown.

Digital advertising has also been rocked by changes to Apple’s IOS software on iphones, which has made it easier for consumers to switch off advertising tracking. Mr Zuckerberg has told staff he expects Apple to be a “very deep competitor” to its metaverse ambitions.

Mr Zuckerberg has issued demands for increased productivity and perfor- mance at the Silicon Valley company in response to the slowdown.

In a call on June 30, Mr Zuckerberg told staff he was keen to weed out underperformers, The Verge reported. He said: “Realistically, there are probably a bunch of people at the company who shouldn’t be here.” Meta’s headcount has swelled in the last three years from 48,000 to close to 83,000 people.

The company’s Instagram product, for a long time the key driver behind its growth, was also plunged into an identity crisis this week after some of its most popular celebrity users, including Kylie Jenner, criticised the app’s design changes.