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Is Meta Falling? Ads Revenue Shrink as Meta Suffers More Losses

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By Augustine Mbam - - 5 Mins Read

The ad revenue of Meta continues to shrink, and the company expects more losses in the Q4 of 2022. 

The CEO of tech giant Meta, Mark Zuckerberg, has affirmed that he is still committed to building the metaverse and willing to spend billions on it. 

Zuckerberg has been committed to developing the metaverse economy despite the money his company has lost because of such commitments. The health of the Meta advertising business is moving to the critical stage as many people are dishing it for other alternatives. 

While on Meta's third-quarter earnings report, Mark Zuckerberg and other company executives had to entertain some questions from concerned investors and analysts. From the look of things, expenses and costs continue to increase in the company as it jumped 19% year over year to approximately $22.1 billion. 

The loss of 19% was very much below analysts' estimates, leading to increasing concern. The revenue of the Meta company also suffered a meltdown. It slipped about 4% of their revenue. However, their profit in the third quarter seemed to increase by 52%.

Meta's Reality Labs Continues to Gulp Money

The virtual reality unit of the company is where most Meta losses come from. The Facebook parent company has invested heavily in Meta's Reality Labs, but they are yet to make a substantial profit.

A Metaverse Illustration - Image by Riki32 from Pixabay

As of 2022, this department of Meta has lost about $9.4 billion, and its revenue has decreased by more than 50% to $285 million. When asked what he thought was the cause of the revenue issue Meta Reality Labs was facing, Meta chief financial officer Dave Wehner attributed the issue to "lower Quest 2 sales."

"We do anticipate that Reality Labs operating losses in 2023 will grow significantly year over year. Beyond 2023, we expect to pace Reality Labs investments to achieve our goal of growing overall company operating income in the long run," said Meta. 

However, several professionals and analysts have started questioning Mark Zuckerberg's beliefs on the metaverse. Some analysts, such as Brent Thrill of Jefferies, said many investors of Facebook's metaverse feel they are "too many experimental bets versus proven bets on the core."

 Brent Thrill asked Mark Zuckerberg if his company still believes that the metaverse will be successful despite the massive losses they have suffered. Mark Zuckerberg said," I just think that there's a difference between something being experimental and not knowing how good it is going to end up being."

Meta Records Massive Losses in the 1st and 2nd Quarter of 2022 

The third quarter of 2022 is one of many quarters of the year where massive losses have been recorded. 

When Meta was reporting its quarterly earnings around April 2022, the losses were very much, with many coming from their metaverse venture. 

In quarter 1 of 2022, Meta Reality Labs was operating at a loss of $2.96 billion. The CEO of Meta, Mark Zuckerberg, still hopes his team will be able to turn things around. 

In quarter 2 of 2022, the company experienced more losses as its virtual reality project cost them $2.8 billion. The company saw a source of revenue drop after it raised the price of the Quest 2 headset from $299 to $399.

Meta, while fulfilling its metaverse ambition, has spent money on acquiring startups and VCs to help them build their headsets.