Facebook parent Meta had a rough 2022. The social media giant laid off thousands of workers, reported its first revenue drop and saw a decline in daily active users on Facebook.
Now Meta CEO Mark Zuckerberg said the company is focusing heavily on efficiency in 2023 as it continues to invest in the metaverse and artificial intelligence. For the last 18 years, the social network has grown rapidly but it’s entering a new phase, Zuckerberg said.
“It’s very hard to really crank on efficiency while you’re growing that quickly and I just think we’re in a different environment now,” he said during a call with analysts on Wednesday after Meta reported better-than-expected revenue in the fourth quarter. If the company becomes more efficient, he said, Meta will be able to do better product work and become a more fun place to work because employees will get more done.
The focus shows how Meta is responding to economic uncertainty as advertisers pull back spending. Meta has weathered numerous privacy scandals and regulatory scrutiny but now the company is also facing business challenges. Meta said it would be cutting underperforming projects, removing more middle managers and using AI tools to help its engineers be more productive. The social network cut 11,000 workers, representing about 13% of its workforce, in November and has frozen hiring through the first three months of 2023. Meta also downsized office space and reduced perks.
Zuckerberg said in a November blog post that the company started to hire more during the pandemic as people spent more time shopping online and using social media. But this bump in online activity didn’t last, and the company also faced other challenges, such as an economic downturn and increased competition from short-form video app TikTok. In addition, Apple made privacy changes that made it tougher for advertisers to track data about potential customers. All these challenges led to Meta’s decision to lay off workers, Zuckerberg said.
Meta reported fourth-quarter revenue that beat Wall Street’s expectations and saw a jump in daily users in the last three months of 2022, a sign that some of the social network’s toughest times could be behind the company.
Meta’s fourth-quarter revenue was $32.2 billion, above estimates of $31.5 billion, data from Refinitiv shows. The company reported fourth-quarter earnings of $1.76 per share but Meta noted the figure included charges related to layoffs and other moves to cut costs. Nearly 3 billion people used one of Meta’s apps daily including Instagram, Facebook and WhatsApp, a 4% increase compared with the same period last year.
Meta’s stock jumped nearly 19%, to $182.50 per share, in after-hours trading.
Like other businesses, Meta has been trying to slash costs because it hasn’t been making as much money as expected from ad sales. The company saw its first-ever quarterly revenue drop in July 2022.
Prioritizing AI and the Metaverse
Zuckerberg acknowledged 2022 was a “challenging year. At the same time, the company has been trying to invest more in the metaverse, virtual spaces where people can work, play and socialize. The company introduced a new $1,500 virtual reality headset in October.
But Meta still has to convince consumers to spend money on VR. The company lost $13.7 billion on augmented reality and VR projects in 2022, known as Reality Labs. It will also have to moderate offensive content such as harassment and hate speech in these virtual spaces, a task that is tougher to do in more immersive spaces.
Insider Intelligence principal analyst Debra Aho Williamson said that Meta needs to stay focused on “stabilizing its stabilizing its core platforms, Facebook and Instagram.”
“With losses at its VR division mounting, Mark Zuckerberg is going to have to accept an unfortunate reality: Virtual worlds are simply not what businesses or consumers want right now,” she said.
Meta has also been doubling down on the use of AI to recommend videos or posts that users could be interested in on Facebook and Instagram. With the rise in popularity of AI programs such as ChatGPT that generate texts, Zuckerberg said one of the company’s goals is to be a “leader in generative AI.” AI could help enable more tools, including for creators, he said.
“I do expect that the space will move quickly,” Zuckerberg said. “I think we’ll learn a lot about what works and what doesn’t.”
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