- Meta has struggled since last year to rebound from “ad signal loss” due to Apple’s privacy changes.
- Advertisers are seeing ad performance improve with the deployment of AI-led targeting.
- It’s expected to be a boon to revenue growth, while major layoffs and cost-cutting continue.
Meta’s troubles with advertisers for the last 18 months may soon be over.
The company, formerly known as Facebook, lost billions of dollars in revenue last year due to Apple’s App Tracking Transparency, a privacy change that prompted users to opt out of being tracked by apps that targeted them with advertising. Mark Zuckerberg said several times in 2022 Meta struggled with “signal loss” for ad targeting, the core of its giant business, because of the change. The CEO even blamed Meta’s first round of layoffs in November, in part, on its struggle to come back from its Apple-driven ad issues.
Just six months later, Meta is headed for a comeback, according to Ron Jacobson, CEO and co-founder of Rockerbox, an ad measurement company. Jacobson spoke Thursday to analysts at Evercore, an investment advisory firm.
“Meta’s ad performance is recovering close to pre-ATT levels,” Jacobson said. The company recently deployed ad targeting through artificial intelligence. AI is something Zuckerberg and other Meta executives have repeatedly highlighted this year, as spending on the metaverse seems to take a backseat. Wall Street approves – shares of the company are up 131% from five months ago.
Although the digital ad economy broadly remains in an “ad winter,” according to Jacobson and Evercore, Meta has benefitted from advertisers’ budgets becoming more conservative, as has Google.
“When times are tough, marketers revert to the tried-and-true channels – namely Google and Meta,” Evercore said. “Jacobson noted these remain the most resilient platforms as advertisers pull back from experimental channels.”
In the fourth quarter of 2022, Meta’s ad impressions increased by 23% compared to the previous year. A potential return to form for Meta’s ad business did not stop Zuckerberg from declaring 2023 to be the company’s “Year of Efficiency” and last month confirmed another 10,000 workers would be laid off by the end of May.
While Zuckerberg said in a public note regarding the second wave of layoffs that a new “economic reality” of slower revenue growth and macro instability may “continue for many years,” Wall Street analysts are more cheery about Meta’s prospects this year.
“With the bulk of cost takeout benefits likely now underwritten, attention shifts back to growth,” analysts at Bernstein said in a note regarding Meta’s additional layoffs.
“We believe Meta is well positioned to re-capture market share, while engagement continues to track in the right direction – the AI investments are paying off,” Bernstein added.
Meta will report first quarter results on April 26, which will show more clearly if the company has been able to improve ad targeting for the long term. Evercore, however, anticipates a swift “return to double digit revenue growth” – something the company hasn’t seen since the fourth quarter of 2021. As for the usage of its apps, which also declined last year for the first time in Meta’s history, Evercore expects a better performance there too.
Analysts at Evercore said in a Monday note that user engagement for Instagram has accelerated in the first quarter to “a record high,” while the Facebook app also saw “modest” growth. This growth is “almost certainly evidence of Reels as an incremental engagement driver.” Meta’s ability to make money from Reels, its short-form video play launched last year, through advertising is also expected to improve, Evercore added, perhaps creating the new stream of revenue Meta has been promising.
Meanwhile, Evercore noted a “plateauing” of engagement on TikTok, which Meta created Reels to compete with.” That is creating a “stabilizing competitive landscape for all.”
Are you a Meta employee or someone else with insight to share? Contact Kali Hays at email@example.com, on secure messaging app Signal at 949-280-0267, or through Twitter DM at @hayskali. Reach out using a non-work device.