The owner of Facebook and Instagram was hit hard by a reduction in advertising revenues in the three months leading up to July, which resulted in the company’s first-ever year-over-year revenue decline.

Although Meta’s overall sales dropped 1% to $28.8 billion (£23.7 billion), the business managed to fend off a reduction in users. After years of significant gains, analysts worry that the company’s growth may have peaked. While more businesses are vying for advertising dollars, competitors like TikTok have diminished its popularity.

Why this matter
Meta, which typically controls more than 20% of the global ad market, warned investors that ad sales were likely to decline once more in the months to come as e-commerce spending declines from its pandemic boom and businesses become more cautious with their spending due to concerns about inflation and the conflict in Ukraine.

In response to the downturn and the company’s plans to redirect investment into new areas, including its virtual reality platform, Horizon, in a wager that the so-called metaverse is its best prospect for growth, Meta boss Mark Zuckerberg said the company would reduce its hiring “steadily” over the next year.

The Federal Trade Commission, the nation’s consumer protection agency, said it would file a lawsuit to stop Meta’s acquisition of the virtual reality fitness startup Within Unlimited, which is the owner of the programme Supernatural, due to monopolistic concerns. According to Angelo Zino, senior equities analyst at CFRA Research, the success of those ambitions is still years away because of Meta’s difficulty in growing its user base.

In essence, he claimed, the company is now one with little to no growth.

Facebook announced its first-ever fall in daily users earlier this year. As a result, the business—which also owns WhatsApp—recently changed its algorithms on Instagram and Facebook so that they behave more like TikTok, suggesting content to users from accounts other than the ones they already follow.

Users have expressed outrage over the actions, perhaps most notably celebrity Kylie Jenner, who this week tweeted a message with her more than 360 million Instagram followers saying “Make Instagram once more Instagram. (Stop attempting to be Tiktok; all I want to see are adorable pictures of my friends.) sincere thanks to all “.

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