Meta Platforms CEO Mark Zuckerberg speaks at Georgetown University in Washington on October 17, 2019.
Andrew Caballero-Reynolds | AFP | Getty Images
Meta Platforms CEO Mark Zuckerberg said on the company’s second-quarter earnings call Wednesday that the economy appears to be in a downturn that will hurt digital advertising, so parent company Facebook needs to do more with less.
The comments came after Meta, which runs ad-dependent social networks Facebook and Instagram, disclosed second-quarter revenue and earnings that fell short of analysts’ estimates. Social media rivals Snap and Twitter reported lower-than-expected quarterly results last week.
“Engagement trends on Facebook have been generally stronger than we expected, and Reels’ strong growth continues to drive engagement on Facebook and Instagram,” Zuckerberg said on a conference call with analysts. “That said, we appear to have entered an economic downturn that will have a far-reaching impact on the digital advertising business. It’s always difficult to predict how deep or how long these cycles will be, but I would to say that the situation looks worse than it did a quarter ago.”
Earlier on Wednesday, the US Federal Reserve raised its key rate by 75 basis points and Fed Chairman Jerome Powell said growth in consumer spending has slowed significantly. But he said he did not believe the U.S. is in a recession right now, and the National Bureau of Economic Research has not decided on the timing of a possible recession.
That hasn’t stopped Meta, Alphabet’s Google and other tech companies from scaling back hiring plans.
“This is a period that requires more intensity, and I expect us to do more with fewer resources,” Zuckerberg said.
In May, the company told the media it was reducing the slowdown in headcount growth. At Wednesday’s conference call, Zuckerberg elaborated.
“Our plan is to steadily reduce headcount growth over the next year,” he said. Many teams will shrink so we can shift energy to other areas within the company, and I want to give our leaders the ability to decide within their teams where to double, where to fill in and where to restructure teams.”
Sheryl Sandberg, Facebook’s outgoing chief operating officer, said on Wednesday’s call that Russia’s invasion of Ukraine and the normalization of e-commerce after an outbreak during Covid continue to hold back the company’s growth, and inflation and the uncertainty of a recession add to the complexities.
“Despite the current challenges, I’m very confident about the long term,” Sandberg said. “We are facing a cyclical downturn, but the digital advertising market will continue to grow in the long term. Advertisers will go where they get the highest return on investment and the ability to drive their business. We believe that we continue to perform very favorably compared to other advertising options.”
The tough economic climate factored into Meta’s third-quarter guidance, said David Wehner, the company’s outgoing chief financial officer.
Meta shares fell 4% after hours after the call.
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