Meta is setting up a product organization to identify new ‘possible paid features’ for its family of popular apps in the wake of seeing its advertising business severely impacted by Apple’s ad tracking changes, a new internal memo reveals.
The decision comes as the California-based company faces a range of challenges.
Facebook in July reported its first ever yearly decline in revenue for the second quarter, announcing a 1 percent drop to $28.8 billion, and the social network said growth could fall further in the next quarter. Net income – profits – plunged by 36 percent compared to the previous quarter, to $6.7 billion.
Apple’s new ‘Ask app not to track’ feature that’s a prompt on iPhones has reportedly cost Meta $10 billion in ad revenue just last year. During its most recent earnings call, the company also projected that third-quarter revenue to fall further, to between $26 billion and $28.5 billion, saying that ‘a continuation of the weak advertising demand’ would weigh on sales.
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Facebook reported its first quarterly decline in daily users this year and has been trying to convince investors that it can compete with TikTok for users.
Meta’s VP of monetization overseeing the group John Hegeman told The Verge: ‘I think we do see opportunities to build new types of products, features, and experiences that people would be willing to pay for and be excited to pay for.’
Hegeman did not elaborate on what paid features are being considered.
Hegeman seemed to downplay paid features becoming a meaningful part of the business in the near term, but said that ‘on the flip side, I think if there are opportunities to both create new value and meaningful revenue lines and also provide some diversification, that’s obviously going to be something that will be appealing.’
The group, called New Monetization Experiences, will be led by Pratiti Raychoudhury, who was previously Meta’s head of research, per The Verge.
Currently, WhatsApp charges certain business accounts for the right to message their customers and Facebook group administrators are allowed to charge for access to some content. But most of the billions who use Facebook, Instagram and WhatsApp have free access.
Longer term, Meta sees paid features becoming a more meaningful part of its business, Hegeman said. ‘On a five-year time horizon I do think it can really move the needle and make a pretty significant difference.’
Even so, the company is clearly struggling as it faces headwinds from Apple’s privacy push, increased competition from ever-popular TikTok and a broad advertising slowdown.
‘We seem to have entered an economic downturn that will have a broad impact on the digital advertising business,’ Zuckerberg said.
‘We’re slowing the pace of [our] investments and pushing some expenses that would have come in the next year or two off to a somewhat longer timeline.’
One of those expenses seems to be hiring and staffing, with Zuckerberg saying he wanted to allow internal leaders to choose how they restructure their teams.
‘I want to give our leaders the ability to decide within their teams where to double down, where to double down, where to backfill attrition, and where to restructure teams while minimizing [the impact] to the long-term initiatives.’
Zuckerberg has continued to tout the company’s plans for the metaverse – despite being blasted online for a recent avatar he shared that looked ‘dead-eyed’ and ‘creepy.’
Meta also has a range of new augmented and virtual reality headsets in development as part of its planned multibillion dollar expansion into the metaverse.
Late last month, an irate Zuckerberg warned staff that he will weed out underperforming employees with ‘aggressive performance reviews’ as the company braces for a deep economic turndown.
‘If I had to bet, I’d say that this might be one of the worst downturns that we’ve seen in recent history,’ Zuckerberg told workers in a weekly employee Q&A session on Thursday, audio of which was heard by Reuters.