Meta's revenue rises despite mounting metaverse losses: Here's what happened
What's the story
This time last year, Meta was nursing the wounds of a first-ever quarterly revenue decline. Things have changed one year down the line. Meta has recorded its best performance since 2021, with an 11% jump in its second-quarter revenue. This happened while the company's metaverse division continued to bleed billions. Let's see what worked for the tech giant.
Context
Why does this story matter?
The year 2022 was a forgettable one for Meta. The social media giant was among the worst hit by the post-COVID tech rout. It seemed the Facebook and Instagram parent would find it hard to stop the slide. However, Meta has managed to do so. The Mark Zuckerberg-led company achieved this through a variety of measures.
Layoffs
Mass layoffs led to fall in personnel costs
Meta was criticized a lot for laying off over 20,000 employees. The company did that as part of its quest to make 2023 "the year of efficiency." In other words, the tech giant wanted to correct its course after over-hiring during the pandemic. The mass layoffs were bad for affected employees, but the fall in personnel costs seems to have worked for Meta.
Reels
Reels get 200 billion views per day
Another driving factor behind Meta's strong quarter was Reels, the company's TikTok copycat feature. Meta has been pushing Reels on Facebook and Instagram for a while. It is currently drawing 200 billion plays per day across both platforms. The firm's AI-driven recommendations have increased the popularity of Reels. Reels' monetization run rate also increased from $3 billion to $10 billion.
Ads
Meta's revenue from ads increased
One of the chief reasons behind Meta's poor showing in 2022 was the fall in ad revenue. The company was affected by Apple's new privacy rules and decreased spending by corporations. In the second quarter, Meta saw an increase in digital ad revenue. The tech giant recorded an advertising revenue of $31.5 billion in Q2 2023, up from $28.2 billion in Q2 2022.
Metaverse
Reality Labs lost $3.7 billion in second quarter
Meta's strong showing in the second quarter was marred by the poor performance of Reality Labs, the division responsible for its metaverse projects. It lost $3.7 billion in Q2 while generating only $276 million in revenue. Meta expects the losses to increase even further. Zuckerberg, however, remains optimistic about the metaverse. As long as Meta performs, he will have room to be optimistic.