Earnings Season: Facebook’s stinging loss

Quarterly user numbers drop for the first time as Facebook/Meta shares disappointing fourth quarter results.

Facebook earnings

Facebook Q4 2021 headline stats

Despite revenues coming in ahead of expectations, Facebook earnings fell in a downbeat quarter for the social media giant.

With shares down 20% after its report, things are looking fairly bleak for Zuckerberg and co., despite the new Meta branding and mission.

Its earnings miss but revenues beat is a reverse of Facebook’s third quarter earnings.

Here are the headline stats for Facebook/Meta’s fourth quarter:

• Earnings per share – $3.67 vs. $3.84 forecast
• Revenue – $33.67 billion vs. $33.4 billion forecast
• Daily Active Users (DAU) – 1.93 billion vs 1.95 billion forecast
• Monthly Active Users (MAU) – 2.91 billion vs. 2.95 billion forecast
• Average revenue per user (AVPU) – $11.57 vs. $11.38 forecast

Not only did earnings fail to meet Wall Street expectations but user numbers fell too. As we can see from the above, the number of daily and monthly Facebook users declined in Q4 2021.

Facebook is under intense competition from other platforms across its network. TikTok in particular is grabbing users left right and centre, capturing a younger generation’s imaginations more than Facebook. Google parent Alphabet, which saw YouTube ad revenues fall in Q4, is dealing with the same problem.

There is also a problem with perception. Facebook used to be the cool kids’ hangout; now it’s more synonymous with fake news, misinformation, and argumentative boomers. Not a great look.

Facebook/Meta facing more challenges

In addition to the above competition, Facebook is facing other challenges in different areas of its business.

According to the company, high inflation and supply chain issues amongst key advertisers has led to the drop in revenue.

Then there is Apple’s iOS privacy changes. Apple has made tweaks to its settings allowing users to modify how much advertising they see. Meta claims this will cost the business up to $10bn in revenue – some of the first concrete figures we’ve seen regarding the Apple change’s impact.

“We believe the impact of iOS overall is a headwind on our business in 2022,” Meta CFO Dave Wehner said on an analysts call. “It’s on the order of $10 billion, so it’s a pretty significant headwind for our business.”

Users are also shifting to other parts of the Facebook platform that don’t necessarily provide revenue at this time. Many are heading to Reels, Facebook’s video service, although adverts have started to appear on some videos here.

“On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories,” the business said.

Facebook/Meta also said that it expects user growth to continue to slow after delivering subpar guidance for Q1 2022.

Q4 2021 was the first quarter were user growth fell away. Alarm bells are possibly starting to ring in the Zuckerberg world. How it can tempt them back onto the platform remains to be seen. Maybe it’ll mimic Google/YouTube and start booting up a shorter version of its Reels service.

As it stands, Facebook/Meta are a bit of an outlier when it comes to big tech earnings this quarter. Goole recorded bumper earnings, with shares popping 9%. Apple’s Q4 was another record-breaker with its own shares up 11% immediately post-earnings.

Tesla enjoyed a high-performing quarter too.

Maybe Facebook’s time at the top is ending? Zuckerberg and his cohorts are now pushing ahead with the Metaverse concept, blurring the lines between the physical and the digital world, but if users are starting to lose interest in Facebook as a whole, will this stumble? It’s tough to say at present.

Be sure to check out our earnings calendar to see who is reporting and when this earnings season.