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Meta Shares Plunge Following Reports of Unusual Profit Drop

Jessica Medina by Jessica Medina
February 28, 2022
in News
Meta Shares Plunge Following Reports of Unusual Profit Drop
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Photo by Maxim Hopman 

On Wednesday, Meta (formerly Facebook) ruffled investors by reporting an unusual profit plunge. It comes as a result of the giant’s exorbitant investment on its vision for the metaverse, a virtual reality platform, while facing advertising problems on its known services as well.

The tech giant reported an approximately $10.3 billion net income in the last three months of 2021, showing an 8% plunge from a similar period from the year previously and under the estimation of Wall Street analysts.

The profit plunge comes as an effect of Meta’s exorbitant spending into the VR and AR technologies it hopes will aid in the development of the metaverse. Metaverse, thus far, is still a conceptual immersive version of the internet.

Mark Zuckerberg, CEO at Meta, described this new technology as the future of the company. Simultaneously, Meta is confronting an alteration to Apple’s iOS that has deeply challenged its internal advertising business.

Meta’s stocks plummeted at least 23% following the announcement.

For the year, Meta has disclosed an over $10 billion loss in Reality Labs, their AR and VR unit. This is the first ever report of the unit’s financials. Earlier, CFO Dave Wehner has foretold those investments in Reality Labs would decline the firm’s general operating profit in 2021 by approximately $10 billion. During the year, the unit earned only $2.3 billion in revenue.

In an emailed commentary, Mindshare Worldwide’s global chief digital officer Tom Johnson said, “Investors will look at these numbers closely as a first indicator of how far off the Metaverse is from being a profitable reality.”

The company revealed a stagnant growth in its internal advertising business, which comprises about 99.5% of its total revenue. Year-over-year, advertising revenue increased 20%—it’s snail-like growth for the year—to $32.6 billion, following the iOS alteration, making targeted advertising harder.

The tech giant fell short of increasing its daily or monthly active consumer bases on Facebook from the third quarter, a rare slip for Meta.

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Jessica Medina

Hello, I am Jessica. I have been working as a copywriter in an online magazine firm for 10 years.

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Photo by Maxim Hopman  On Wednesday, Meta (formerly Facebook) ruffled investors by reporting an unusual profit plunge. It comes as a result of the giant’s exorbitant investment on its vision for the metaverse, a virtual reality platform, while facing advertising problems on its known services as well. The tech giant reported an approximately $10.3 billion net income in the last three months of 2021, showing an 8% plunge from a similar period from the year previously and under the estimation of Wall Street analysts. The profit plunge comes as an effect of Meta’s exorbitant spending into the VR and AR technologies it hopes will aid in the development of the metaverse. Metaverse, thus far, is still a conceptual immersive version of the internet. Mark Zuckerberg, CEO at Meta, described this new technology as the future of the company. Simultaneously, Meta is confronting an alteration to Apple’s iOS that has deeply challenged its internal advertising business. Meta’s stocks plummeted at least 23% following the announcement. For the year, Meta has disclosed an over $10 billion loss in Reality Labs, their AR and VR unit. This is the first ever report of the unit’s financials. Earlier, CFO Dave Wehner has foretold those investments in Reality Labs would decline the firm’s general operating profit in 2021 by approximately $10 billion. During the year, the unit earned only $2.3 billion in revenue. In an emailed commentary, Mindshare Worldwide’s global chief digital officer Tom Johnson said, “Investors will look at these numbers closely as a first indicator of how far off the Metaverse is from being a profitable reality.” The company revealed a stagnant growth in its internal advertising business, which comprises about 99.5% of its total revenue. Year-over-year, advertising revenue increased 20%—it’s snail-like growth for the year—to $32.6 billion, following the iOS alteration, making targeted advertising harder. The tech giant fell short of increasing its daily or monthly active consumer bases on Facebook from the third quarter, a rare slip for Meta.
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