Another problem: Reels just isn't monetizing at the same rate as its Feed and Stories formats, but it is eating into time spent on those legacy formats. That’s likely because keeping ads to a minimum helps build an audience; more efficient monetization can and will come over time. Alphabet chief Sundar Pichai made that point on a Tuesday earnings call touting the growth of Shorts, YouTube’s TikTok competitor.
Analyst insight: DAU growth is a positive sign for Facebook “especially coming off of Q4 2021 when it experienced its first-ever decline in DAUs,” said analyst Evelyn Mitchell. “But it’s also clear that Facebook is still struggling to bring in new users, and it’s becoming increasingly difficult for Instagram to pick up the slack.” But Mitchell notes that a significant portion of that DAU growth came outside of North America, and those markets bring in less ad revenue per user than the US and Canada.
Reality check: The company’s Reality Labs unit, which is responsible for virtual reality (VR) and augmented reality (AR) hardware and software, brought in Q1 revenue of $695 million, up over 30% from the year prior. But it had losses of $2.96 billion—nearly 62% higher than its year-earlier quarterly loss.
- Without legacy advertising sales to fund its metaverse ambitions, the company will “slow the pace of some of our investments,” CEO Mark Zuckerberg said on the firm’s earnings call.
- Meta’s global headcount was 77,805 at the end of Q1, up 28% from a year earlier. Roughly 17,000 employees belong to the Reality Labs unit. That means about 22% of the company is responsible for about 2.5% of its revenue—an untenable ratio.
- Meta needs to focus on righting the ship in its core operations before further extending itself in business lines that may take years to provide substantial returns.