Explained: What Worries Meta And Users Of Its App, Instagram?

Meta's revenue fell year over year for the first time in the company’s history last quarter.

The company revealed this during yesterday’s earnings report.

To add salt to the wound, Federal Trade Commission, America’s competition regulator, filed a complaint to stop Meta from taking over a virtual-reality firm. Virtual-reality or the 'metaverse', as the company likes to call it, is the sector on which Meta is banking its future growth.

"Facebook parent Meta reported a steeper-than-expected drop in revenue, missed on earnings and issued a surprisingly weak forecast, pointing to a second consecutive decline in year-over-year sales. The shares dropped 3.8% in extended trading," as per a report from the CNBC.

Here’s how the company did:

• Earnings: $2.46 per share vs. $2.59 per share expected, according to Refinitiv.

• Revenue: $28.82 billion vs. $28.94 billion expected, according to Refinitiv.

• Daily Active Users (DAUs): 1.97 billion vs 1.96 billion expected, according to StreetAccount.

• Monthly Active Users (MAUs): 2.93 vs 2.94 billion expected, according to StreetAccount.

• Average Revenue per User (ARPU): $9.82 vs. $9.83 expected, according to StreetAccount.

Meta's shares have lost about half of their value since the beginning of this year. Investors are concerned about the health of the company’s core, which is - online advertising business.

One major pain point for Zuck is competition from TikTok. TikTok is taking up an increasingly large portion of users’ screen time—and with it, advertising dollars.

As a result of this, Meta has decided to make Instagram another Tiktok, much to the chagrin of many old time users such as yours faithfully.

Instagram CEO Adam Mosseri confirmed on Tuesday that Instagram is testing updates that prioritise short-form videos from people you don’t follow over your elder cousin’s cooking recipe pics. “I do believe that more and more of Instagram is going to become video over time,” he said.

Mosseri’s comments were basically his way of saying “sorry, not sorry” to complaints that Instagram was abandoning the photo-sharing features that made it so beloved in the first place.

The changes that were made to Instagram recently did not go down well.

After the changes, a post that went viral this week read: “MAKE INSTAGRAM INSTAGRAM AGAIN. (Stop trying to be TikTok I just want to see cute photos of my friends).” Many influential users of the app too didn't hesitate from sharing this post and acted as an loudspeaker, voicing the frustration of many users.

And TikTok isn't the only thing that worries Meta. An Apple privacy update that allows iPhone users to opt out of targeted advertising has cost Meta a lot. $10 billion, to be precise. $10 billion in ad revenue since Apple rolled it out last year.

Mark Zuckerberg said that the company will be reducing headcount over the next year as it tightens its belt for the economic slowdown.

“This is a period that demands more intensity and I expect us to get more done with fewer resources,” he said.

In the long term, Meta is placing its bet on the growth of the Metaverse. Everyone already knows that Zuckerberg changed Facebook’s name to Meta last year, but since then he has also shaken up its workforce from the top down.

According to the NYT, Sheryl Sandberg, the company's COO, stepped down after 14 years because she wasn't interested in building the Metaverse.

Thousands of employees throughout the company have been moved into metaverse-related roles.

Meta’s virtual reality division lost $2.8 billion last quarter, however, Zuckerberg believes that he is moving in the right direction.

“This is laying the groundwork for a very successful 2030s," he said.

If you are one of those people who is already irked by algorithm-driven content recommendations on Instagram and believe that the app has lost its charm, you won't like the what Meta has to offer in the future.

Zuckerberg said that the amount of content recommended by its artificial intelligence systems on Facebook and Instagram will double by the end of next year.

These apps will now be relying less and less now on your social graph (the web of networks between people you follow and people who follow you) and more on AI driven algorithms recommending you content from people you don't even follow. So more content from 'influencers' and less content from family and friends.

Facebook was suppose to be a company focused on helping people connect, and with Facebook and Instagram, the company did succeed in doing that for a long time. Zuckerberg addressed the concerns of people who expressed worry about the direction in which the company is heading. Content from people and accounts the user follows will remain an important part of the experience, he said.

The truth is, like TikTok, Meta's business model is reliant on advertising revenues. To get those revenues, the more these platforms have your attention, the better it is for them.

Attention driven economy. And, they have reached a conclusion that people are more likelier to spend their attention on these platforms when the newsfeed is an endless stream of AI curated content from people you don't know instead of content you curate yourself by following people you know.

Of course, there is a chance that the later leaves you feeling connected and fulfilled in a meaningful way, even though you may be using the app for a less amount of time, and the former leaves you feeling more isolated, despite you using the app for an increased amount of time.

The companies of course are not concerned about any of the well documented negative impact (especially on the mental health of young girls and women) of social media. Meta is worried about its bottom line and about ensuring it doesn't loose too much of the market share to TikTok.