Shares in the Facebook group Meta Platforms lost around 23 percent of their value in one fell swoop on Wednesday evening. The reason is a significantly lower margin, higher losses from the Metaverse and a less optimistic forecast than financial analysts had hoped. After the release of the financial data, institutional investors placed sell orders in after-hours trading. Within minutes, more than 200 billion US dollars company valuation fizzled out.
Meta Platforms is selling more and more advertising, and at ever higher prices. The number of advertisements on Facebook, Instagram and Messenger increased by ten percent in 2021 – faster than the number of users. This means that meta-users are increasingly being presented with more advertising. At the same time, the data company managed to bill an average of almost a quarter more for each advertisement than in 2020.
Meta hardly has any other income. The logical consequence: Annual sales grew by 37 percent to 117.9 billion US dollars. Operating profit rose 43 percent to $46.8 billion. This results in a margin improved by two percentage points to 40 percent. Because the annual tax rate rose by five percentage points to 17 percent, net income was “only” $39.4 billion (+35%).
Quarterly profit down
That’s according to financial data released by Meta Wednesday night. They show that the fourth quarter of 2021 is not quite in line with the annual trend. The number of advertisements has increased by 13 percent, but their average price has “only” increased by six percent. For the last three months of the year, Meta’s revenue was $33.7 billion, up 20 percent year-on-year. Because costs have risen by 38 percent at the same time, operating profit has fallen by one and a half percent to $12.6 billion.
At 37 percent, the margin calculated from this is only three percentage points lower than the annual average, but is still nine percentage points below the fourth quarter of 2020. At the same time, the tax rate rose by five percentage points to 19 percent. This results in an eight percent lower quarterly net profit of $10.3 billion.
Because the company has diligently bought back its own shares, the cash in the treasury has declined slightly despite high profits. At the turn of the year, Meta had $16.6 billion immediately available. A year earlier it was $17.6 billion. At the turn of the year, the group had 71,970 employees – almost a quarter more than twelve months earlier.
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In the current quarter, Meta expects to turn over 27-29 billion dollars, an increase of three to eleven percent. Both the average price and the number of advertisements are expected to grow less than usual. Among other things, users would watch more videos, which allows for fewer ads than text and still image content.
Meta Feels Privacy Actions From Regulators As Well As Apple; in addition, the strong US dollar is reducing income in other currencies. After all, advertisers are no longer so willing to spend: On the one hand, they notice the inflation, on the other hand, they cannot sell as much as they would like due to delivery problems – and what you can’t offer for sale, you don’t have to advertise on Facebook for a fee. The tax rate should remain at the higher level of 2021 in 2022.
More and more users
Facebook managed to get 1.93 billion users to log in daily (daily active users, DAU) in December 2021; that is five percent more than in December 2020. In December there were even 2.91 billion users (monthly active users, MAU) on Facebook at least once a month, an increase of four percent. If you also add Instagram, Messenger, WhatsApp and other services, Meta was able to market 2.82 billion DAU (+8%) and 3.59 billion MAU (+9%) in December.
The company now breaks down sales and operating profit into two divisions: The “Family of Apps” includes Facebook, Instagram, Messenger, WhatsApp and other services. On the other hand, there are the “Reality Labs”, where work is being done on hardware, software and content for augmented reality and virtual reality.
While the Family of Apps has a monthly turnover of around ten billion dollars and can pocket a good five billion dollars as operating profit, the reality labs are still in their infancy. They’re only turning over a few hundred million dollars a month, but they’re making over a billion dollars a month in operating losses. That’s too much of a minus for some big investors, which is why they dumped shares Wednesday night.
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