We seem to be in an ‘economic downturn’

Meta Platforms CEO Mark Zuckerberg speaks at Georgetown University in Washington on October 17, 2019.

Andrew Caballero-Reynolds | AFP | Getty Images

Meta Platforms CEO Mark Zuckerberg said during the company’s second-quarter earnings call on Wednesday that the economy appears to be in a downturn that will hurt digital advertising, so Facebook’s parent company must do more with less.

The comments came after Meta, which operates ad-dependent social networks Facebook and Instagram, announced revenue and earnings for the second quarter that were lower than analysts’ estimates. Social media rivals Snap and Twitter reported lower-than-expected quarterly results last week.

“Facebook engagement trends were generally stronger than we anticipated, and Reels’ strong growth continues to drive engagement on Facebook and Instagram,” Zuckerberg said during a conference call with analysts. That said, we seem to have entered an economic downturn that will have a broad impact on the digital advertising business. It’s always hard to predict how deep or how long these cycles will be, but I’d say the situation looks worse than it did a quarter ago.”

Earlier on Wednesday, the US Federal Reserve raised its benchmark interest rate by 75 basis points, and Fed Chair Jerome Powell said consumer spending growth has slowed significantly. But he said he did not believe the US is now in a recession, and the National Bureau of Economic Research has made no statement on the timing of a potential recession.

That hasn’t stopped Meta, the parent company of Google, Alphabet and other tech companies, from slashing hiring plans.

“This is a period that requires more intensity, and I expect we’ll get more done with fewer resources,” Zuckerberg said.

In May, the company told media that it was cutting back to slow its workforce growth. During Wednesday’s conference call, Zuckerberg explained.

“Our plan is to steadily reduce workforce growth over the next year,” he said. A lot of teams are going to downsize so we can shift energy to other areas of the company and I want to give our leaders the ability to decide within their teams where to double down, where to top up attrition and where to restructure teams.”

Sheryl Sandberg, Facebook’s outgoing chief executive, said on Wednesday’s call that Russia’s invasion of Ukraine and the normalization of e-commerce following an explosion during Covid continue to dampen company growth, while inflation and uncertainty about a recession are contributing. to the complexity.

“Despite the current challenges, I am very confident for the long term,” Sandberg said. “We are in a cyclical downturn, but in the long run the digital advertising market will continue to grow. Advertisers will go where they can get the highest return on investment and boost their business. We think we will continue to show very favorably compared to other advertising opportunities.”

The difficult economic environment has been factored into Meta’s third-quarter outlook, said David Wehner, the company’s outgoing finance chief.

Meta shares fell 4% hours after the call.

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