We seem to have entered an “economic recession”

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 on the company’s second-quarter earnings call Wednesday that the economy appears to be in a downturn that will hurt digital advertising, so Facebook’s parent company has to do more with less.

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

“Engagement trends on Facebook have been generally stronger than we anticipated, and strong growth in Reels continues to drive engagement on Facebook and Instagram,” Zuckerberg said on a conference call with analysts. “That said, it looks like we’ve entered an economic downturn that’s going to have a big impact on the digital advertising business. It’s always hard to predict how long these cycles will be, but I’d say the situation looks worse than it did a year ago. fourth”.

Earlier on Wednesday, the US Federal Reserve raised its benchmark rate by 75 basis points and Fed Chairman Jerome Powell said growth in consumer spending has slowed significantly. But he said he did not believe the U.S. is in recession now, and the National Bureau of Economic Research has not commented on the timing of a potential recession.

That hasn’t stopped Meta, Google parent Alphabet, and other tech companies from scaling back hiring plans.

“This is a period that demands more intensity, and I hope we can do more with fewer resources,” Zuckerberg said.

In May, the company told the media that it was reducing the slowdown in workforce growth. On Wednesday’s conference call, Zuckerberg elaborated.

“Our plan is to steadily reduce headcount growth over the next year,” he said. Many teams will shrink 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 duplicate, where to fill attrition, and where to restructure teams.”

Sheryl Sandberg, Facebook’s outgoing COO, said on Wednesday’s call that Russia’s invasion of Ukraine and the normalization of e-commerce after a blowout during Covid continue to slow the company’s growth, and inflation and uncertainty about a recession add to the complexity.

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

The difficult economic climate is factored into Meta’s third-quarter guidance, said David Wehner, the company’s outgoing chief financial officer.

Shares of meta were down 4% in after hours after the call.

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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!