1. The company had a great quarter: ad revenue increased by 12% y-o-y, compared to @Google‘s 3.3%. This is across all properties, including Facebook, Instagram and Whatsapp. (We’ll ignore the Reality Labs/Metaverse revenue for now since it is less than 1% of the total, but see below.) The increase in ad sales is completely explained by an increase of monthly active users (MAU) by 6.3% and an increase in average revenue per user (ARPU) of 5.2%. However, the ARPU increase is nothing out of the ordinary for Meta, it is well within the bandwidth of the company’s ARPUs for the past two years. In other words, Meta shines because its publishing products continue to become more popular. (They have for the past two years.)
2. The company said they had great plans for AI, large-language models (LLM), its #Reels video service and its “X”-clone #Threads. No mention though of the Metaverse.
3. Re. the omission of the #Metaverse initiative (conducted by Meta’s Reality Labs division): some observers interpreted this as a sign that the company has concluded the initiative is going nowhere and should be abandoned. Maybe. The division’s revenue is mostly hardware sales and has jumped up and down anywhere between about $300M and $900M – with last quarter being the lowest at $276B. Worse, capital expenditure on the Metaverse only went down to $3.7B from $4.0B. So, little revenue with no upward tendency, and enormous research spending that has hardly been curbed. I am not sure they’re ready to let that vision go. Yet, go they should let it, because there is no actual consumer use case except for a handful of gamers, and industry-wide AR device sales have been anemic for years. Perhaps the only way forward for Reality Labs would be to focus on augmented reality (AR) instead of virtual reality (VR) – I still beliueve AR has a grand future ahead if it. VR, not so much.
4. Re. Threads, while they did mention it in the “great plans” category, since they didn’t have much good to say about it, they didn’t. User numbers have collapsed, and it will be extremely hard to get them back up (if it is possible at all).
5. In spite of these flies in the ointment, the overall results beat market expectations. Meta’s stock price went up by 1.3% (after an initial 6% surge). That price is still lower by about 10% than the high in September 2021, but has risen steadily since last October.
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