Welcome back to closing bell on cheddar news.
Everyone christian Schuller here alongside ken buffa. Hi there Kristen.
Well, busy, busy day meta just reported earnings a few minutes ago.
So let's dive deeper
into those second quarter results with other news.
Senior reporter Michelle Castillo. So Michelle
a lot of things that take away from this report. So what are some of the big ones,
You know, let's just start with the top and bottom line. So they did miss slightly.
Um, you're looking at $2.46 for the uh, earnings per share.
Um, again lighter than last year.
Um, I don't think it's comparable though to the estimate of uh,
$2.59 because this result was not adjusted.
Um, you're also looking at revenue that came in a little lighter 28.8 billion.
The estimate was 28.9 billion according to Refinitiv analysts.
This is a really notable mark for meta because it is the first time
in the company's history that they have
actually lost revenue growth year over year.
They lost about 1% revenue growth year over year and
that is something that was really concerning to investors,
especially as a company that usually does double
digits of revenue growth year over year.
So this is why they did warn of headwinds ahead for the third quarter.
Um, they said the second quarter wasn't as strong as they would have liked it to be.
And they also admitted that other divisions like realty Labs,
which does handle their metaverse.
Um, division isn't going to be as profitable or not even profitable,
but not make as much money as they were expecting.
Remember they just raised the price of an Oculus headset, $100.
So definitely trying to earn more revenue at a time where
advertisers are pulling budgets and digital advertising is still there.
Big moneymaker.
Well,
I know a big step that people like to
reference Michelle is the average revenue per user.
The r pu if you will, how did that come in in the second quarter?
Well, it was a little lighter than expected.
So the average revenue per user this time around came in at a light $9.82.
The street was expecting $9.83
but it was really on facebook where you're seeing, that's for facebook itself.
Now,
the really interesting thing is when you look
across the family of apps that facebook owns,
remember that includes instagram and that includes WhatsApp.
That is really important because the
average revenue actually drops considerably.
I think it's only $7.91 worldwide. Um, compared to that $9.82 on Facebook,
we do know that they're typically facebook isn't
growing as fast as their other apps.
So it is important to see that that company still continues to add users
because if that's the majority of where
they're earning their average revenue per user.
It's important that that still continues to keep people
active and we did see that in this report,
Um daily active users for Facebook was at 1.97 billion
as opposed to the streets estimate of 1.96 billion.
I think that's why you're seeing that investors aren't punishing meta as much,
even though they did miss on the top and bottom line in
this case because they're seeing that they're still growth in Facebook and
their other apps so that revenue number is still going up when
it comes to how much money they can make off their users.
Now we saw a big shift of focus to the metaverse. But
is it paying off for me to do we have that data yet?
So this is definitely going to be a long game for meta because
it's going to take billions of dollars in investment to grow this metaverse,
even though they aren't the only company that is investing heavily in it.
So as of now they said that they revenue from
the realty Labs Doually about $452 million $28.4 billion.
So you're looking at a huge difference
in just how much money they can make off the metaphors
compared to their traditional platform and
their traditional instagrams and Facebooks.
In addition, that is a lot lower than you saw in previous quarters.
So in q one of 2022 really labs actually brought in $695 million.
So they're actually not making as much money as they were making
last year and they're still having to invest quite heavily in it.
So this is something that we knew.
The one thing is we did know that facebook said it was gonna
take a while before they would start seeing profits in this division,
but they are definitely still operating at a loss.
The loss this year though was slightly lower than last year's.
They're losing about $2.8 billion this last quarter,
interesting.
Well look,
we did see a big change for instagram that's upsetting some users
Michelle even the Kardashians weighing in and so what happened here,
I don't know about you, but I've definitely noticed that my instagram feed is less,
my friends more memes and definitely more video and
that change might be here to stay we have a
little bit of adam Massery explaining why he thinks that
instagram is going to be a video first platform.
Take a listen.
I need to be honest,
I do believe that more and more of instagram is gonna become video over time.
We see this, even if we change nothing. We see this.
Even if you just look at chronological feed,
if you look at what people share on instagram that's shifting more and more to videos
over time if you look at what people like and consume and view on instagram,
that's also shifting more and more to video over time,
even when we stop changing anything.
So we're gonna have to lean into that shift while continuing to support photos.
Now this is a really interesting move for the company.
Instagram is known to be one of their
youngest platforms that really brings the average age
of user down and also more into those
key demographics that brands want to advertise to.
The problem is instagram really started as a way to connect with friends,
we know it for static photos, even videos, but really a way to connect with people,
you know,
that's a little different from Tiktok which
is more seen as an entertainment platform.
It's not as friend reliant.
Um, the way the algorithm works, it rewards people by going viral,
but you don't necessarily have had to follow
them or follower count doesn't necessarily matter,
it's more that you're hitting the right algorithm
and reaching the right audience so anyone can
go viral on that platform as opposed to
instagram where it's more influencer certain account based.
So the fact that instagram is shifting more towards that Tiktok model to
capture more of that popularity is alienating some of its core users and it's
going to have to figure out a way to balance both of that because
it is one of the things that is really floating facebook right now,
especially in the growth stance,
instagram is still one of the most popular downloaded apps in the
apple app store.
So they don't wanna anger too many people and they definitely
don't wanna anger some of the biggest influences on their platforms,
like the Kardashians.