Kylie Jenner and Kim Kardashian have apparently downgraded Facebook and Instagram parent Meta Platforms. Their opinion could matter as much as those of increasingly worried Wall Street analysts.
Reporting its second quarter results Wednesday, the social-media giant said it saw quarterly revenue drop for the first time ever from a year earlier. Worse, the midpoint of its third-quarter revenue forecast came in roughly 10% below Wall Street’s expectations. Analysts had been banking on a sequential top-line improvement in the current period, but Meta’s forecast suggests broader economic uncertainty could keep the pain coming. Meta’s shares fell moderately in after hours trading immediately following the report, cushioned by weak social-media competitor results last week and the biggest tech stock rally since 2020 on Fed policy optimism on Wednesday.
Data from eMarketer show Meta has expanded its share of worldwide digital ad revenue from less than 17% in 2017 to over 22% as of last year. But over that period, Facebook’s share has declined while Instagram’s grew by nearly 7 percentage points, according to the data.
That underscores the importance of Instagram’s popularity to Meta’s livelihood, especially as Facebook’s user numbers have been stagnating. Analysts estimate Instagram has been generating a little over 30% of Meta’s total advertising revenue, according to Visible Alpha. To keep things hot amid pressure from ByteDance’s short-form video app TikTok, Meta is furiously working to shift Instagram into a more video-focused platform while still trying to support the photo sharing that made it famous.
It isn’t going so well. Instagram Story reposts this week from Kylie Jenner and Kim Kardashian, who collectively boast 687 million followers, urged the platform to “MAKE INSTAGRAM INSTAGRAM AGAIN,” suggesting it “stop trying to be tiktok” and instead re-embrace its photographic roots.
These days, even Instagram head Adam Mosseri will tell you Meta’s jewel has lost some luster. In an Instagram Reel this week, his description of a test of full-screen photo and video as “not yet good” seems an apt description of Instagram’s broader changes.
How much do major creators’ opinions matter? Let us recall a February 2018 tweet by Ms. Jenner, who even today has a comparatively smaller Twitter following of just 40 million, in which she admitted to not opening Snapchat any more. Right on cue, Snapchat lost users in 2018 from a year earlier and revenue growth more than halved.
Celebrities aren’t the only ones against Instagram’s TikTok-like video push. Many creators say they are being forced to use video on the platform because its algorithm makes it so that photos are “just not being seen.” As if blind to the comments on his own posts, Mr. Mosseri said in an explainer video this week that Instagram will likely lean even more into video over time “because that’s what people are using.”
Instagram’s identity crisis is symbolic of investors’ broader thesis change on Meta as a whole. Formerly known as Facebook, Meta’s share price grew nearly 10-fold from the time of its 2012 initial public offering through the end of last year; this year, it has shed half of its value.
The near-term outlook isn’t bright. Chief Executive Mark Zuckerberg reportedly told employees last month that the current economic downturn “might be one of the worst” seen in recent history. But he hasn’t exactly been acting accordingly: While the company has said it would reduce hiring and overall expense growth plans this year to reflect the challenged operating environment, Meta’s head count at the end of the second quarter grew by nearly a third versus the same time last year, while capital expenditures grew by more than 40% on a sequential basis.
To support those expenses for now, Meta must continue to lean on its ad business. The company said it expected revenue for its Reality Labs segment, which houses its virtual reality business, to decline in the third quarter from the meager $452 million it put up in the second quarter. As an indication of how its VR efforts are going, Meta said this week it will be raising the price of its VR headsets next month by between 25% and 30%, depending on the model, likely in an effort to curb some losses for that business. In the first half of this year alone, Reality Labs lost more than $5.7 billion.
It is time for executives to remove their rose-colored VR goggles and— metaphorically speaking—keep up with the Kardashians.
This story has been published from a wire agency feed without modifications to the text