Meta's quarterly profit dives as tough economy hits tech

SAN FRANCISCO, United States — Facebook-parent Meta reported Wednesday that its profit more than halved to $4.4 billion in the third quarter from $9.2 billion a year earlier, and said it plans "significant changes" to bolster efficiency in a tough economic environment.

The social networking giant, which faces stagnating user numbers and cuts in advertising budgets, also said revenue slipped to $27.7 billion from $29 billion a year earlier.

"We're approaching 2023 with a focus on prioritization and efficiency that will help us navigate the current environment and emerge an even stronger company," said Meta chief Mark Zuckerberg.

Meta shares plunged 19.1 percent to $105 in after-market trades, the price less than a third of what it was at the start of this year.

"While we continue to navigate some challenging dynamics - a volatile macro economy, increasing competition, ad signal loss and growing costs from our long term investments -- I have to say that our product trends look better from what I see then some of the commentary I've seen suggests," Zuckerberg told analysts on an earnings call.

The number of monthly active users at Facebook was up just two percent to 2.96 billion at the end of September, Meta reported.

Meanwhile, the number of employees at the tech titan tallied 87,314, a 28 percent increase from a year earlier, the earnings report stated.

"We are making significant changes across the board to operate more efficiently," Meta said in the release.

The Silicon Valley-based tech firm said that it expects to hold headcount levels in check over the next year.

Zuckerberg said that while tightening its belt, Meta will focus on its artificial intelligence that powers recommendations at offerings such as short-form video feature Reels, as well as ad messaging platforms and its vision for the metaverse.

Apple squeeze

Big tech platforms have been suffering from the economic climate, which is forcing advertisers to cut back on marketing budgets, and Apple's data privacy changes, which have reduced leeway for ad personalization.

"Meta is on shaky legs when it comes to the current state of its business," said Insider Intelligence principal analyst Debra Aho Williamson.

"Mark Zuckerberg's decision to focus his company on the future promise of the metaverse took his attention away from the unfortunate realities of today."

Those realities include Meta being under pressure due to global economic conditions, competition including TikTok, and Apple letting iPhone users curb collection of data "signals" for targeting money-making ads, according to the analyst.

Apple last year began letting iPhone users decide whether to allow their online activity to be tracked for the purpose of targeting ads -- a change which it said shows its focus is on privacy, but which critics note does not prevent the company itself from tracking.

Meta expected that policy, which impacts the precision of the ads it sells and thus their price, to cost the social media giant $10 billion in lost revenue this year.

This week, Apple updated its App Store rules to require that apps offered there use its payment system for sales of "boosted" posts, which are essentially ad messages promoted to the top of social media feeds for a price.

The App Store is the lone gateway for digital content to get onto iPhones or iPads.

The change means that Apple will be able to collect its 30 percent commission on that type of advertising at Facebook and Instagram, where all the money made previously had gone to Meta because they used their own payment system.

"Apple continues to evolve its policies to grow their own business while undercutting others in the digital economy," Meta said in reply to an AFP inquiry.

"Apple previously said it didn't take a share of developer advertising revenue, and now apparently changed its mind."

Meta had long delivered seemingly endless upward growth, but reported early this year its first decline in global daily users.

In July, Meta reported its first quarterly revenue drop and a plunging profit.