Mark Zuckerberg, CEO of Meta Platforms, stated during the firm’s second-quarter earnings call on Wednesday that there appears to be a slowdown in the economy that will harm digital advertising, forcing the Facebook parent company to make do with less while achieving more.
The comments followed Meta’s release of second quarter results and revenue that fell short of analysts’ expectations. Meta operates the advertising-dependent social networks Facebook and Instagram. Twitter and Snap, competitors in the social media space, released lower-than-anticipated quarterly earnings last week.
“Engagement trends on Facebook have generally been stronger than we anticipated and strong Reels growth is continuing to drive engagement across Facebook and Instagram,” During an analyst conference call, Zuckerberg stated. “That said, we seem to have entered an economic downturn that will have a broad impact on the digital advertising business. It’s always hard to predict how deep or how long these cycles will be, but I’d say that the situation seems worse than it did a quarter ago.”
The U.S. Federal Reserve increased its key interest rate earlier on Wednesday by 75 basis points. Fed Chair Jerome Powell said that the rate of growth in consumer expenditure had noticeably slowed. However, he asserted that he did not think that the United States was currently experiencing a recession and that the National Bureau of Economic Research had not made a decision regarding the potential timing of one.
That hasn’t stopped Meta, Alphabet, the parent company of Google, and other technological firms from scaling back their hiring ambitions.
“This is a period that demands more intensity, and I expect us to get more done with fewer resources,” Mark said.
The business informed the media in May that it was slowing down headcount expansion. Zuckerberg commented during the conference call on Wednesday.
“Our plan is to steadily reduce headcount growth over the next year,” he said. “Many teams are going to shrink so that we can shift energy to other areas inside the company, and I want to give our leaders the ability to decide within their teams where to double down, where to backfill attrition and where to restructure teams.”
The normalisation of e-commerce following an explosion during Covid, according to Facebook’s departing operations head Sheryl Sandberg, continue to impede the company’s growth. Inflation and the prospect of a recession also complicate matters, she added.
“Despite the current challenges, I’m very confident for the long term,” Sandberg said. “We’re facing a cyclical downturn, but over the long run digital ad market will continue to grow. Advertisers will go where they get the highest return on investment and ability to drive their business. We believe we will continue to show up very favorably compared to other advertising options.”
According to Meta’s outgoing finance officer, David Wehner, the company’s third-quarter guidance takes the current economic situation into account.
After-hours trading on Meta shares fell 4% after the call.