The Role of Chinese Retailers in Boosting Meta’s First-Quarter Sales

The Role of Chinese Retailers in Boosting Meta’s First-Quarter Sales

After suffering from three quarters of revenue declines, Meta, formerly known as Facebook, has seen a boost in their first-quarter sales, thanks to Chinese retailers. The company’s Chief Financial Officer, Susan Li, revealed during their earnings call that the social networking giant experienced a surge in Chinese advertisers targeting users in other markets. The increase in sales was thought to be due to dropping shipping costs, and the easing of Covid lockdowns for advertisers. The companies spent a significant amount of money on Facebook and Instagram ads aimed at consumers living outside of China, indicating that China’s recent easing of its zero-Covid policy has indirectly benefited Meta.

Volatility and Challenges Ahead

While Meta’s sales have grown by 3% year-over-year to $27.91 billion in the first quarter, the digital advertising market remains turbulent. Li commented that Meta saw stronger demand in the quarter, particularly as the Russia-Ukraine War passed its one-year mark in February. Nonetheless, Li stated that the company expects a “volatile macro environment” and a “challenging regulatory environment” overall, with European Union regulators continuing to impose tough data privacy laws and requirements that affect the company. Despite this, the fact that Meta was able to turn the tide on declining sales was enough to cause investors to rejoice, with shares rising by nearly 12% in after-hours trading.

The company’s CEO, Mark Zuckerberg, addressed the recent round of layoffs, which impacted technical workers last week, and reminded analysts of the upcoming job cuts that will hit business groups in May. The CEO also spoke about the company’s “year of efficiency,” which will result in some 21,000 employees leaving the company by early summer. After May, Li said that the company “will resume hiring and we would expect headcount growth in excess of 1 to 2% in 2024.”

Zuckerberg reiterated that the metaverse remains a core priority for Meta, despite the company’s recent shift to focus on new artificial intelligence technologies that could aid its advertising and business messaging services. The highly speculative bet on virtual worlds that engendered the company’s name change from Facebook is still in focus. Although the Reality Labs unit logged nearly $4 billion in first-quarter losses off $339 million in sales, the company remains committed to developing the virtual reality and augmented reality technologies needed for the yet-to-be-developed metaverse. Zuckerberg emphasized that the two areas are related, and the company will continue to focus on both AI and the metaverse.

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