Meta Platforms, the parent company of Facebook and Instagram, saw its revenue dip 4% year-over-year in the fourth quarter of 2022, marking the third consecutive quarter of decline. Despite ad impressions rising 23% YoY during this period, the average price per ad dropped 22%. Despite this, Facebook reported 2 billion daily active users in Q4, which CEO Mark Zuckerberg attributed to advancements in AI and the short-form Reels format.

In 2023, the focus at Meta will be efficiency as the company aims to create a leaner organization. Meta’s total expenses for 2023 are forecasted to be between $89 billion to $95 billion, which is lower than previous projections. The company’s stock performance improved in premarket trading after it announced share buybacks totaling $40 billion.

Reels, a short-form video format similar to TikTok, remains a focus area for Meta, with 40% of Meta advertisers using it across its apps. However, Reels are not yet as monetized as other areas of Meta’s business, meaning higher engagement could result in lower revenue. Zuckerberg expects Reels to be in a revenue-neutral place by the end of 2023 or early next year.

Meta is betting on AI to boost its ad operations and counteract the impact of changes to Apple’s iOS that make targeting and measuring mobile campaigns more challenging. In Q4, advertisers saw a 20% increase in conversions compared to the previous year, which Zuckerberg attributed to AI advancements. This, along with a lower cost per acquisition, resulted in a higher return on ad spend.

The company’s long-term ambitions are focused on the metaverse, a blend of physical and digital experiences. Reality Labs, the Meta division responsible for developing its metaverse products, recorded a $4.3 billion operating loss in Q4, raising questions from investors about the mainstream appeal of this experimental space.

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