The parent company of social network Facebook startled the stock market with a surprisingly cautious outlook when it presented its quarterly results. It talked about tougher competition and said new data rules from Apple would cost it $10 billion in revenue this year.

The share price of the company, which was recently renamed Meta Platforms by Facebook, fell by more than 20 percent at times in after-hours trading. Shares in competitors also came under considerable pressure. Snap's share price also fell 20 percent, while Twitter suffered an 8 percent drop.

Meta predicted unusually low revenue growth of 3 percent to 11 percent to $27 billion to $29 billion for the first quarter; analysts had expected more than $30 billion on average. The group provided several justifications, and one was particularly noteworthy. It spoke of increasing competition for its users' time. Critics often complain about Facebook's dominant market position, and the group is even facing a lawsuit from its antitrust authorities in the U.S. because of it.

With reference to increased competition, he now painted a somewhat different picture. And he backed it up with another key figure: According to his data, the number of its daily users in North America fell by one million to 195 million in the past quarter.

Meta CEO Mark Zuckerberg said in a conference call, "People have a lot of choice." And he specifically referenced the rapid growth of smartphone app TikTok. That makes "Reels," the short-video format launched in 2020 and considered Facebook's answer to TikTok, all the more important, he said. Zuckerberg already described TikTok as "one of the most effective competitors" his company has ever had when presenting financial figures three months ago.

Meta cited Apple's controversial changes to its data rules as another reason for its cautious forecast. Chief Financial Officer David Wehner said the company estimates the associated negative impact on revenue at $10 billion, and he described that as a "significant headwind." Meta's 2021 revenue totaled $117.9 billion, so the expected losses from the Apple effect matter.

The new policies introduced last year hinder the collection of user data on Apple devices that is relevant for the advertising business. This makes it more difficult for Facebook to tailor advertising to individual users and measure the success of ad campaigns. Facebook and Apple have engaged in a high-profile dispute over these rules.

Inflation hits advertisers

Meta also addressed other pressures on his business, saying current bottlenecks in global supply chains and general inflation are leaving a mark on advertisers' budgets. And Reels, while growing rapidly, has not yet brought in as much advertising revenue as other formats. Stricter regulations are also affecting the business.

The figures for the final quarter of last year were not free of disappointment either. It is true that revenues rose by 20 percent to $33.7 billion and were slightly above analysts' expectations. But even that represented a significant slowdown in growth compared with previous quarters. Net profit actually fell 8 percent to $10.3 billion due to higher costs. Earnings per share of $3.67 were 17 cents lower than expected.

Meta's weaker-than-expected numbers were all the more surprising because competitor Google had reported stellar results just a day earlier. Its parent company Alphabet reported a rapid increase in sales and profits, and its share price rose sharply on Wednesday.

Meta restated its business segments for the first time in its latest quarterly report. On the one hand, there is the "family of apps," which includes the parent service Facebook and platforms such as Instagram, Messenger and Whatsapp. Until now, they have accounted for almost all of the Group's revenue.

In addition, there is now the category "Reality Labs" with activities around virtual reality ("Virtual Reality") and augmented reality ("Augmented Reality"). The virtual reality goggles of the subsidiary Oculus fall into this segment. Zuckerberg sees these businesses as the most important building blocks for the "metaverse" that he has recently been increasingly propagating.

By this he means virtual spaces in which the boundaries to reality are blurring. In the last quarter, the Reality Labs still brought in a manageable revenue of 877 million dollars. So far, they are also still running at a high deficit, with an operating loss of $3.3 billion. For the full year, the loss was even more than $10 billion.

Photo by Souvik Banerjee