Is the worst over for Mark Zuckerberg’s social-media empire?
, the first three quarters of last year were rough. In July 2022 his social-media empire, Meta, announced its first ever year-on-year decline in quarterly revenues. Three months later it reported another. Investors sneered at his expensive pivot from a lucrative ads business to the untested realm of the metaverse, on which Mr Zuckerberg was splurging $10bn a year. By November Meta had lost roughly three-fifths of its market value since its peak of $1.
On February 1st Mr Zuckerberg reported another decline in sales for the last three months of 2022, of 4.5% year on year. But the drop was smaller than expected. The company also put out an optimistic forecast for the current quarter, in which it thinks revenue could reach $28.5bn. That would be more than in the first three months of 2021, before Apple introduced privacy rules for its iDevices that made it considerably harder for advertisers to track users across the internet.
Investors greeted all this with a big “like”. Meta’s share price, which had already risen by over 70% in the previous three months, leapt by another 20% or so after hours. That would put its market capitalisation at $484bn. Squint and the company, which had been all but relegated from the ranks of big tech, is back in the fold.
Can the hot streak last? Mr Zuckerberg has reasons for cautious optimism. Meta has come up with ways to work around Apple’s privacy settings. Itsare improving, both in the lab and in the real world—specifically, in the world of Reels, where algorithms for serving up short videos on Facebook and Instagram, Meta’s two profit motors. These are reportedly getting cleverer at creating engagement.
Plenty could still go wrong. What used to be recession-proof digital-ad spending is becoming more cyclical, and the economic cycle is turning downwards. Even if Meta’s Western markets avoid a recession, advertisers are likely to rein in spending. Despite a degree of bipartisan support for a TikTok ban, political gridlock in Washington makes any actual legislation to that effect unlikely in the near future.
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