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Meta earnings: Daily and monthly active users decline

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Yahoo Finance tech correspondent Dan Howley analyzes Meta's second-quarter earnings miss and the social media company's reported decline in monthly active users for Facebook and Instagram.

Video Transcript

SEANA SMITH: Meta shares now off just about 2 and 1/2% on the heels of its earnings report. Tech editor Dan Howley joining us now on set to dive a little bit deeper into this report. Dan, you were talking about daily active users a bit better than what was initially expected. Monthly active users, though, a bit of a different story.

DAN HOWLEY: Yeah, so they added about 8 million daily active users. At least, that's the way these slides are presented. But then they lost about 2 million monthly active users. Now that's both on the main Facebook app. Now you may be wondering how you can lose monthly users while still gaining daily users. That's a good question. And we still have to figure that out. Basically, Facebook says that you have to go into their SEC records to see what their definitions are for both of those.

But it's certainly worth mentioning because we had seen in prior quarters, when we saw the first daily active user drop from Facebook, that was a big deal. And I think we're starting to see, just as you dig through this, getting more of a sense of what Facebook position-- Meta, rather-- is in. And if you just want to real quick, their margins collapsed from 31% to 29%, while their CapEx from 2021 to 2022 went from 4.7 billion-- this is for Q2 by the way-- 4.7 billion to 7.7 billion.

So they're still plowing all of that money into the Reality Labs. They said they're going to be pulling back on that. We did see a little bit pullback for that. They had their operating loss for this quarter for Reality Labs was $2.8 billion. That's down from $2.9 billion in Q1 2022. So just a slight decrease. And that's been kind of trending in that direction since Q4 of 2021. So they're obviously dealing with a lot of issues here. But I think overall, the big point is that they missed on Q3. And that's what a lot of people are going to be following.

DAVE BRIGGS: Speaking of issues, one of their central issues right now is TikTok, and whether they transition, whether they copy TikTok or not, which is their emphasis on Instagram. They are going with Reels, emphasizing that. And they've been very heavily criticized by some of the most influential people on Instagram-- Kim Kardashian and Kylie Jenner.

So there was an Instagram post, Make Instagram, Instagram Again. It got 2 million plus likes. And then there was a change.org petition to do so, which is north of 200,000 signatures. On the heels of that, the Instagram CEO Adam Mosseri puts out a video, oddly, on Twitter, not on Instagram, answering the criticism. Listen.

ADAM MOSSERI: I need to be honest. I do believe that more and more of Instagram is going to become video over time. We see this even if we change nothing. We see this even if you just look at chronological feed. If you look at what people share on Instagram, that's shifting more and more to videos over time.

DAVE BRIGGS: Why did he put that out on Twitter? And what do you make of the criticism of Make Instagram, Instagram Again? How is this going to end?

DAN HOWLEY: Yeah, it seems like the kind of criticism is that people aren't seeing what they used to see on Instagram. You know, I think one of the Kardashian-Jenner duo, who came out, Kim Kardashian and Kylie Jenner, they pointed to the fact that they can't see pictures of their friends anymore. I seem to remember this happening on Facebook as well, right? It used to be where you would go on there, and you would see your friends.

When I first got on Facebook, I was in college, so it was just a mess of people chugging Keystone Light. But still, it was people that I knew. Now it's just, I don't know who's on there anymore. And so they divided up the feeds now on Facebook, where you have a recommended feed and then you have your home feed where you can see people who are your friends or part of your groups.

And now we're seeing this on Instagram, where it's definitely changing from pictures of-- now I'm seeing pictures of people having kids, getting married, buying homes, things like that. It used to be that, but now I'm just getting-- I mean, outside of the huge ads, it's changing the look of it to these large box screens where it's taking over the entire display. And you're getting more video than photo.

And they're saying basically, look, we're going to favor the video, not the photo. So if you want to get on there, you want your friends to be able to see each other, maybe they should put videos on there. So, I mean, that really seems to be what they're trying to do. And it is just aping TikTok. But people aren't happy about it because--

DAVE BRIGGS: They are not.

DAN HOWLEY: --at the end, they're two different ads. And I think they really draw in to different crowds-- or two different apps, rather. And they draw in two different crowds. So I just don't see how Instagram can compete at this point.

DAVE BRIGGS: That's a--