Balance sheet submission: Meta share still in bull mode: Facebook parent Meta Platforms earns less | news


The number of users at the Facebook group Meta grew significantly again at the beginning of the year after a slump at the end of 2021. In the first quarter of this year, 1.96 billion users accessed Facebook every day – around 30 million more than three months earlier.

In the previous quarter, the daily number of users had fallen for the first time, by a million to 1.929 billion. Despite the small decline, this was interpreted as an alarm signal. At the time, Meta admitted increased competition from the short video app Tiktok as a key reason. The stock then lost a quarter of its value in one day and then fell even further.

Now founder and boss Mark Zuckerberg emphasized the success of the in-house Tiktok copy Reels. For example, on Meta’s Instagram app, users watched Reels videos a fifth of the time, he said in a conference call with analysts. On Facebook, video accounts for half of usage time – and Reels has seen growth there too. Meta is still working on an advertising format for this.

Tiktok became popular with the idea of ​​letting software select short videos for users based on their interests. Among other things, the algorithms pay attention to how long you stay with a video before continuing to scroll.

Zuckerberg now wants to use such artificial intelligence not only for the personalization of short videos. It should recommend all sorts of content across Meta’s different platforms to users, he said. “I think in the future people will increasingly use discovery machines based on artificial intelligence to entertain them, teach them things and connect them with people with similar interests.” That would be a departure from the original Facebook principle, in which users choose which people, companies or organizations to follow.

At the end of last year, Zuckerberg announced the focus on a future digital world – the Metaverse – and therefore changed the company name from Facebook to Meta. Then came the Tiktok shock. Now Zuckerberg emphasized that the previous services like Facebook and Instagram would have to make enough money to finance the development of the new platform. Short video should be the key for this.

Meta’s Reality Labs division, which also houses the business with glasses for displaying virtual reality, takes care of this. Thanks to these devices, Reality Labs made sales of $695 million last quarter. At the same time, they posted an operating loss of $2.96 billion due to the expensive Metaverse development.

Overall, things are not going as smoothly for the group as they used to. Revenue grew in the first quarter year-on-year by just 7 percent to $27.9 billion. That’s a very low increase for the group – and Meta missed analysts’ expectations. The bottom line is that profits fell by a good fifth to $7.465 billion.

For the current quarter, Meta announced sales of between 28 and 30 billion dollars. With a previous year’s value of 29 billion dollars, there could even be a decline in sales for the first time.

Among other things, the group refers to the weakening of business due to the Russian war of aggression against Ukraine. This is not only due to the stoppage of the advertising platform in Russia, but also because concerns about the economic consequences of the war are slowing down advertising customer activity overall. The pressure on the proceeds makes it difficult to implement the plan to finance the Metaverse development with the previous business, emphasized Mike Proulx from the analysis company Forrester Research.

Russian authorities had enforced a blockade of Facebook and Instagram because of “extremist activities” in the country. They pointed out that Meta tolerates calls for violence against Russian occupying forces in Ukraine. Technically, Russians can circumvent the block with tools such as VPN tunnels. Nevertheless, Meta expects that the number of monthly active users in Europe will decrease in the current quarter due to the loss of many users in Russia. This will possibly also lead to a decline in the number of users worldwide, said CFO Dave Wehner.

At least one app from the meta group – including WhatsApp as well as Instagram – was recently used by 2.87 billion users every day. In the previous three months it was 2.82 billion.

The group also announced that it would cut costs this year. So far, spending has been estimated at $90 to $95 billion. Meta is now expecting a range of $87 billion to $92 billion.

ECJ ruling: Consumer advocates may sue Facebook

In the case of data protection violations by Internet giants, consumer associations can go to court instead of the users concerned. According to a judgment of the European Court of Justice announced on Thursday, the associations are entitled to sue, even if they have no specific order from those affected.

The ECJ had to deal with the question because the German Federal Court of Justice (BGH) was unsure whether legal standing violated the European General Data Protection Regulation (GDPR). The umbrella organization of consumer centers had criticized the fact that Facebook had violated data protection in the “App Center”, where free games from third-party providers were presented. At least in the 2012 version, users would have automatically consented to the transmission of various data to the game operator by clicking on “Play now”. They gave permission to post the applications too – “status updates, photos and more”.

“Today’s decision ends the tiresome debate about consumer associations’ right to sue for data protection,” said Jutta Gurkmann, head of the Federal Association of Consumer Centers (vzbv), in a statement on Thursday. It is now clear: “In addition to the supervisory authorities, civil society organizations such as the vzbv can also punish violations of the GDPR to a very large extent.” The ECJ judgment creates legal certainty.

In the specific case, the district court and the Berlin Court of Appeal had already sentenced Facebook to cease and desist. The Berlin Court of Appeal ruled in 2017 that the network does not provide sufficient information about what data is passed on and what happens to it. The case finally ended up at the Federal Court of Justice in May 2020. There, the BGH judge Thomas Koch saw a relatively clear violation by Facebook of data protection law. Koch said in May 2020 that the user remains unclear as to what is happening with his data. However, the question of whether associations such as vzbv are even entitled to sue remained open.

In the proceedings, Facebook took the view that the GDPR only entitles the data protection officers to punish violations. In doing so, the EU legislator wanted to create legal certainty for companies, said Facebook’s lawyer before the BGH. National peculiarities ran counter to this.

The European Consumers’ Association (Beuc) was also satisfied with the ECJ’s decision on Thursday. “The General Data Protection Regulation is an important law that protects the personal data of people in the EU,” said Deputy Director General Ursula Pachl in a statement. It is important that it is better enforced and decisions such as the current ECJ ruling contribute to this.

Facebook mother Meta expected with course fireworks

There was great relief on Thursday among the suffering shareholders of Facebook parent Meta after the presentation of quarterly figures. Because the number of users increased significantly again at the beginning of the year after a slump at the end of 2021, the social media company’s paper in NASDAQ trading soared 17.59 percent to $ 205.73. As of Wednesday, it had fallen to its lowest level in two years at $169.

The jump in the Meta share price is also accompanied by a strong pre-market recovery in the entire technology industry. The US index NASDAQ 100, which is characterized by tech stocks, is currently valued 2.5 percent higher by the broker IG, after it was as low as it was at the end of March a year ago the day before. Concerns that more significant and rapid monetary tightening by the US Federal Reserve (Fed) could jeopardize industry growth played a key role. Technology stocks also recovered noticeably in Asia and Europe on Thursday.

According to capital market strategist Juergen Molnar from broker RoboMarkets, the positive news from Meta could help the NASDAQ bottom out. There was also relief in the tech industry because of strong numbers from QUALCOMM. Its strong position in the smartphone market had given the chip company, which is geared towards the telecoms sector, rapid growth in the past quarter.

According to Molnar, Meta was able to convince its investors again thanks to the increased number of users, even if there are still problems on the sales side. “Not only were the revenues in the first quarter below expectations with an increase of seven percent, the group even warns of a decline in sales for the current three months,” emphasized the expert. There have now been similarly mixed signals from the payment service provider PayPal.

According to Evercore ISI analyst Mark Mahaney, Meta is a classic quality stock that’s now somewhat off track. He referred to the price slide of almost 50 percent since the beginning of the year alone. Since the record high in September at just over 384 dollars, the paper has even fallen by 56 percent. “The rating is now downright ridiculous,” wrote Mahaney. After all, it is the world’s leading social media platform.

Appropriately, DZ Bank gave up its previous sales judgment for Meta this morning. Analyst Ingo Wermann reacted to the sharp price loss of the past four months and upgraded the paper to “hold”. He also argued that the weak sales and earnings development was being overshadowed by user growth on “Facebook”. He described the jump in price as a “rally of relief”. He believes that the high risks posed by the restructuring of the group in the direction of “Metaversum” now adequately reflect the relatively low valuation of the Meta share in an industry comparison.

Editorial office / dpa-AFX

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