Facebook reports drop in revenue for the first time

Photo illustration by William Joel | Photo by Andrew Caballero-Reynolds / AFP via Getty Images

Facebook has been growing revenue for a decade.

The social network reported its first ever yearly decline in revenue for the second quarter, and predicted that growth in the third quarter could fall even more. Meta's profit fell 36 percent in the year. In the quarter, the Reality Labs division lost money.

Going into Wednesday's earnings report, revenue growth was expected to drop for the first time in the company's history. Meta lost $10 billion in ad revenue last year due to Apple's "Ask app not to track" prompt on their phones. Advertisers are pulling back on their spending because of the economy.

Meta is trying to compete with TikTok by rearchitecting Facebook andInstagram to place more emphasis on short videos and posts. The percentage of content that comes from accounts they don't follow will more than double next year, according to a call with analysts. The cost of building the artificial intelligence needed to make that happen is high.

Even though Meta's revenue is declining, it was able to grow Facebook's daily users by 3% to 1.97 billion, reversing a decline in users it observed a couple of quarters ago. The number of people using the social apps has increased by 4% from a year ago.

Thanks to an increase in the consumption of videos, the engagement trends on Facebook have been stronger than expected, according to the company's CEO. He said that Reels, the company's short-form video format aimed at TikTok, is monetizing quicker than Stories did after the company copied that format fromSnapchat. The company believes that Reels will be a revenue driver in the future, but they are not making much money from them.

"This is a period that demands more intensity, and I expect us to get more done with fewer resources." We are going to come through this period stronger and more disciplined.