“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,” Chief Executive Officer Mark Zuckerberg said on the earnings call. “The situation seems worse than it did a quarter ago.”
Meta is undergoing a period of immense change, with Zuckerberg trying to rally his employees to work more diligently to retain users, attract young people and prevent a migration to ByteDance Ltd.’s popular TikTok app. Meta put more Reels in its apps, and started paying creators to post them. Investors are focusing on the fact that Facebook ads have declined in price by 14%, according to Bloomberg Intelligence Senior Technology Analyst Mandeep Singh. “That tells you they are making their numbers by increasing ad loads,” or the frequency of ads shown to users for each post. If they have to resort to that, then “they have an engagement problem,” Singh said.
Some of Meta’s competitors are also being hit by the slowdown in advertising spending. Alphabet Inc.’s Google, the market leader, saw an increase in ad sales, especially in search ads where marketers pay for direct-response advertising. But Snap Inc. and Twitter Inc. both struggled to meet sales goals; Twitter’s revenue declined.
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