Changes In Meta Platform Inc., Better To Be "sick" For A While So That Later The Profit Is Bigger

The changes on Instagram have yet to show results. (photo: doc. pixabay)

JAKARTA – Meta Platform Inc., may lie in the metaverse, but when the company reports results on Wednesday, July 27 investors will focus on two immediate bets: pumping up Reels' short video offerings to compete with TikTok and rebuilding its ad system after Apple restricted access. to user data.

Chief Executive Mark Zuckerberg believes it will take time, and that the company needs to speed up the process.

Meta is expected to post its first revenue drop in its history as a publicly traded company, dropping 0.4% to around $29 billion, according to IBES data from Refinitiv.

Investors are also bracing for flat user growth and a third straight quarter of profit declines and are watching for signs of cutting hardware projects and slower hiring to manage costs aka savings.

The social media giant has this year launched redesigns of Facebook and Instagram, emulating the look of TikTok, its social media rival, and algorithm-driven viral short video recommendations.

Meta is also investing heavily in rebuilding its ad system around its own user data, after privacy changes introduced last year by Apple had downgraded Meta's ad targeting capabilities.

Zuckerberg told employees over the phone, which took place on June 30, that Reels represented a "huge opportunity" for Meta, but also noted that the format was "still only about 15% the size of TikTok."

"I think realistically we see a year and a half, maybe even longer, before we really have the outlook to have a strong leadership position," he said.

The timeline for rebuilding the ad system is similar, he said. He repeatedly urged staff to increase their "intensity" to get through the period.

While Meta has the strongest first-party user data in the industry, it also "has a lot of credibility to recover before investors get comfortable with maintaining its leadership position in the secular growth of digital advertising," wrote analysts from RBC Capital Markets.

Zuckerberg told employees that the economy had deteriorated since executives first planned Reel and advertising changes, and outlined plans to speed up the transition so profits from the core business could fund Meta's long-term metaverse bets.

"Our job is basically to bring as much business as possible three years out into two years, or a year and a half out, while also driving things like costs and cost growth," he said.

If needed, he added, the tendency is to "take more pain in terms of slightly less profitability" in the short term, rather than reduce "funding for things in the future."