Meta has had an abysmal 2022. The value of its stock fell 65% year over year, it laid off 11,000 people and employee morale suffered.
There are signs, however, that things are turning around: earlier this month, the company reported stronger-than-expected fourth-quarter earnings and saw its share price jumped more than 20% in a single day. While nearly every other major tech company continues to struggle and has also laid off thousands of its workforce, none has seen a stock market rebound close to Meta’s.
This progress may be overstated and the company is not off the hook yet, according to an internal memo from one of the company’s top executives that Recode obtained. Meta still faces major business challenges, including Apple limiting its advertising business, TikTok’s growing popularity and its brand sentiment among users in the United States.
Meta declined to comment.
In the memo, which Meta marketing director Alex Schultz posted on Meta’s internal employee bulletin board, Workplace, in early February, he warned employees to contain their enthusiasm. “We need to keep our eyes on the horizon and not focus on the street reaction and our stock price,” he wrote. “I believe in this company…but we are still at the beginning of this turnaround, not everything will happen.”
Schultz wrote that Meta is always “at Apple’s discretion”, referring to the new privacy feature which the iPhone maker introduced in 2021 which limited the amount of data Meta can collect on many mobile users, making it harder for the company to target ads – which is a key part of its model commercial. Last February, Meta said the change would cost the company loses $10 billion in revenue per year, about as much as the company spends annually on its metaverse ambitions. Since Apple made the switch, Facebook has been using AI to recoup those losses and better target ads without Apple’s help. An approach, according to the Wall Street Journal, “negotiated with users” to get them to agree to tracking in exchange for seeing fewer ads. However, those efforts are still early days, and Schultz’s note reflects the continued power that Apple, as custodian of the iPhone App Store, still wields over Facebook and Instagram.
The executive also tempered expectations regarding Reels, Meta’s TikTok clone, saying its “monetization efficiency” – or how much money the company is making from ads on Reels – has increased “but remains very low”. Overall, Reels is “even smaller than TikTok,” Schultz wrote. Meta CEO Mark Zuckerberg said in November that the time users spend on Reels is about half of the time spent on TikTok, in countries outside of China.
Zuckerberg also said during a post-earnings call publish this month that there are over 140 billion views of Reels on Facebook and Instagram every day, an increase of over 50% from six months ago. But advertising in Reels still doesn’t make as much money as advertising in Facebook and Instagram feeds.
In terms of the overall popularity of Meta’s apps, Schultz was equally outspoken.
“We’re seeing better numbers on young adults and teens in the US, but we’re not happy, sentiment trends are better for our brands, but that doesn’t mean they’re good in the US and in similar countries and I could go on and on,” Schultz wrote.
The memo is in line with Zuckerberg’s messaging pace in recent months: Employees need to work harder to ensure Meta “wins” again. The company is would have planned another round of layoffs. In particular, Zuckerberg wants remove middle management levels as part of its desire to increase its efficiency.
For Meta, a company that has seen two decades of nearly unstoppable growth come to a sudden halt in the past year, the rating is also a demonstration of the fragility of the company’s trajectory. It’s too early to tell that Meta’s recent stock market gains are back.
As Meta and the rest of the tech industry face unprecedented economic uncertainty, Meta executives don’t plan to let the company rest on its laurels. Schultz’s note is clear: there’s still a lot of work to do before Meta can return to its glory days.
Read the full memo below:
Hey team, just like when I spoke in our Q&A after our stock price plummeted last year, there was another big backlash from the streets to our earnings call (and preparedness) , this time. It’s nice to see people think we’ve improved our discipline and we’re not as bad as they thought. I’ve been in a few groups though where I’ve seen people get pretty excited. So I want to remind you of what I said last year. We’re never as bad as they think in times like last year’s stock market crash, but we’re probably never as good as they think in times like this. We are still at the beginning of this turnaround. We still have efficiency to find to run this business better in the new reality, we are still at the mercy of Apple, relative monetization efficiency has increased on reels but it is still very low, reels have increased a lot but they’re still smaller than TikTok, we’re seeing better numbers on young adults and teens in the US but we’re not satisfied, sentiment trends are better for our brands but that doesn’t mean that they are good in the US and similar countries and I could go on and on. We need to keep our eyes on the horizon and not focus on the reaction of the street and our stock price. I believe in this company, I’m really optimistic for the long term future, all the things I was positive about last year, I feel positive, BUT we are still at the beginning of this turnaround, not everything is will not pass, we will have there are still many ups and downs and we must maintain a long-term focus and keep a cool head, regardless of the outside noise, positive or negative.
Stay focused and keep shipping