First off, on utilization – Fb is now as much as 1.98 billion day by day lively customers, a rise of 16 million on its final report.

However as you’ll be able to see, the laborious promote for Fb right here is that every one of that progress is coming from the Asia-Pacific and ‘remainder of the World’ markets, which aren’t as profitable for the corporate because the US and Europe.

Fb has seen strong progress in India and Indonesia, as connectivity and accessibility will increase in these areas, however the general utilization counts right here don’t contribute as a lot to the corporate’s backside line. They may, hopefully, as these markets mature, and Fb continues to develop its presence. However as you’ll be able to see, DAU progress within the US and Europe is useless, which is a regarding signal for the app.

Fb’s month-to-month lively person counts replicate the same story, with virtually the entire progress coming outdoors of its prime income markets.

However then once more, Fb utilization is holding agency, persons are nonetheless logging into the app day by day, with the overall person rely nonetheless pushing 3 billion. I might query whether or not those that are logging in are spending as a lot time as they used to within the app (one thing Meta doesn’t report), however the general figures do underline the numerous position that Meta’s instruments nonetheless play in our broader interactive panorama, as do its Household Lively Individuals stats (i.e. customers of FB, WhatsApp, IG and Messenger).

Meta’s apps are nonetheless vastly in style. Besides, there are some regarding indicators.

These issues are additional exacerbated when analyzing Meta’s income numbers. Meta introduced in $27.71 billion for the quarter, which remains to be an enormous outcome, nevertheless it represents a lower of 4% year-over-year.

That diminished income efficiency is partly as a result of impacts of knowledge privateness shifts, partly as a result of broader financial downturn – whereas Meta additionally notes that:

“Had international trade charges remained fixed with the third quarter of 2021, income would have been $1.79 billion increased”

In different phrases, there are numerous components at play, it’s not one factor that’s hurting Meta’s income numbers. However cumulatively, they’re having a huge impact, which isn’t good when Meta’s additionally persevering with to put money into its costly metaverse imaginative and prescient, which has seen its prices and bills rise by 19% YoY to $22.05 billion.

What’s even worse right here is that Actuality Labs, its VR division, and its greatest price heart, can also be bringing in much less income over time, as rising VR headset costs, and diminished curiosity within the metaverse, have seen it declining in gross sales and income consumption.

As you’ll be able to see right here, after peaking in This fall final 12 months, doubtless on account of individuals getting Quest headsets for Christmas, Actuality Labs income has declined considerably, whereas working losses for the division proceed to ramp up.

And Meta says that’s solely going to worsen within the short-term:

“We do anticipate that Actuality Labs working losses in 2023 will develop considerably year-over-year. Past 2023, we count on to tempo Actuality Labs investments such that we are able to obtain our aim of rising general firm working revenue in the long term.”

And this doesn’t look nice:

It appears the metaverse push goes to price much more in growth earlier than we attain the subsequent stage.

That is arguably probably the most difficult interval in Meta’s historical past, and certainly, in Zuckerberg’s skilled profession. The corporate has misplaced two-thirds of its worth since September final 12 months (and that’s earlier than this earnings outcome), amid rising skepticism about its metaverse imaginative and prescient, ongoing questions concerning the unfavorable impacts of its apps, and rising challenges to its advert enterprise. 

On the metaverse, as famous, the corporate continues to sink money into its future-looking technique, which, once more, nonetheless seems to be like it may price much more earlier than it’s even near being a workable, useful, viable different for digital connectivity and engagement. Zuck’s view is that, sooner or later, we’ll all be interacting in VR/AR powered areas, which can improve the sensation of connection effectively past what present social media apps are able to doing. And that could be true, nevertheless it’ll require widespread take-up of more and more costly {hardware}, and actually, a killer app or two that may make its VR and/or AR units a real must-have

Meta has mentioned that it’s going to take years, maybe a decade, earlier than we attain the subsequent stage – however can Meta and its traders abdomen ten years of ache for the potential for what may come subsequent?

Which results in the advert drawback. Meta has already mentioned that Apple’s ATT information privateness prompts will price it round $10 billion this 12 months, and it continues to level to ‘headwinds’ within the advert business that are impeding the efficiency of its core advert enterprise. Mix an absence of belief within the firm with extra client selection, then add in a world financial downturn, and the result’s that Meta’s advert companies is just not as strong because it as soon as was. It’s nonetheless good – the overwhelming majority of Meta’s $27b in income this quarter got here from advertisements – however the firm actually must continue to grow its advert enterprise with the intention to maintain funding its future tasks, which, more and more, seems to be to be an unimaginable stability.

You can even add to this Apple’s newest stab on the firm – a 30% tax on boosted posts in social apps introduced simply this week.

So what does Meta do? It’s too late to return now, it’s already sunk billions into the metaverse and what it sees as the subsequent part for the corporate.

It may cut back that funding, as advised by Brad Gerstner of Altimeter Capital in a latest open letter, wherein Gerstner, as a consultant of round 2 million Meta shares, mentioned that:

“We expect Meta ought to cap its metaverse investments to not more than $5B per 12 months with extra discrete targets and measures of success, versus at present’s rather more bold and open-ended technique.”

For context, Meta spent double that on its metaverse tasks final 12 months, and can clearly greatest that once more in 2022.

Perhaps that may be a solution to rationalize funding, and maintain its tasks on monitor – however presumably, that may additionally prolong the timeline for its metaverse growth. And time is one thing that Meta won’t have.

As a result of Meta’s apps, whereas nonetheless vastly in style, and nonetheless, as famous, seeing general progress in general customers, are additionally themselves experiencing a downturn in key areas.

The important thing consideration right here is youthful audiences, which Meta has conceded aren’t utilizing its apps like they as soon as had been.

Tendencies in youthful demographics logically ripple by means of over time, which implies that Meta, whereas it’s nonetheless a key utility in lots of respects, is slowly dropping floor to different platforms.

It’s not taking place quickly, it’s a gradual decline, and it largely pertains to time spent in app, versus logging on to test the newest updates then logging off and spending extra time elsewhere (which, I might argue, is why Meta’s general person counts stay excessive). However it’s clearly taking place, and whereas Meta would like to put extra effort and time into fixing Instagram and Fb, and getting its core enterprise again on monitor, it won’t be capable of try this, as its replication of each trending app that comes alongside appears to counsel.

After which there are the issues across the hurt brought on by Instagram, how Fb continues to facilitate the unfold of misinformation, how Meta’s plans to encrypt all messages will shield criminals from detection.

Once you take a look at the total scope of Meta’s enterprise, actually, it wants to start out recent with the metaverse, and it wants the metaverse to grow to be a factor. In any other case, it’s certainly on a sluggish and regular descent again to earth.

Once more, this isn’t taking place rapidly, I’m not saying that Fb is useless or that Meta might be gone anytime quickly, as a result of it completely gained’t. However Zuck and Co. are logically navigating in the direction of a brand new future for the corporate for good purpose. And now it’s a race to see whether or not it could possibly get there, with out spending an excessive amount of, and pissing off too many shareholders, within the course of.

All that mentioned, I wouldn’t be counting Meta out too rapidly both. Zuckerberg could be very doubtless proper, digital interplay in wholly immersive areas, through avatars, digital items and extra – all of this appears very logical, particularly once you take a look at how kids have interaction in gaming worlds like Fortnite and Roblox. These are the customers Zuck is planning for, not the vocal critics of what the metaverse seems to be like proper now.

And if he will get the timing proper, Meta may nonetheless be the vital connector within the subsequent part.

However proper now, Zuck and Co. might be feeling the warmth, greater than ever earlier than.