Home » Meta platforms face advertiser backlash: Threatens stock stability

Meta platforms face advertiser backlash: Threatens stock stability

by Simon Jones Tech Reporter
16th Apr 24 3:58 pm

Meta Platforms (META -2.15%) has weathered its fair share of controversies, yet investors have praised its performance over the past eighteen months.

Meta’s stock has skyrocketed by over 300% since the onset of 2023, and ad revenue is experiencing a resurgence.

Additionally, the company’s strategic cost-cutting measures and renewed investor confidence have been key contributors to its success. Still, there are now warning signs that momentum could be falling apart.

Advertisers have resorted to social media to complain that the company’s ad platform is faulty and the ad rates are excessive and unsustainable.

Some of Meta’s primary advertising customers, small and medium-sized businesses, have completely reduced their ad spend, stopped advertising on Facebook and Instagram, or switched their budgets to other platforms, such as Alphabet’s Google and ByteDance’s TikTok.


Meta workforce reductions

Meta has taken cost-cutting measures, including a substantial reduction in workforce and a restructured management framework. CEO Mark Zuckerberg praised these developments for their impact on profitability. On a recent earnings call, Zuckerberg said, “I feel like I’ve really come around to thinking that we operate better off as a leaner company.”

However, criticism suggests these cuts may have been too deep, affecting morale and possibly contributing to the platform’s issues.

Last April, layoffs of engineers and related tech teams reportedly hammered employee morale, and one Meta advertiser said the entire ad platform feels broken. The individual noted that the layoffs are directly responsible for the problems with the advertising platform.

Meanwhile, advertisers are turning to other platforms, though it’s not a mass exodus, even among dissatisfied parties. One Meta advertiser recently emphasized the mixed bag of marketing with Meta. “While volatility is a concern, there are also significant benefits,” he remarked.

What it could mean for Meta stock

Meta stock is in a much different position than it was a year ago when it was cheap and priced as a potential turnaround. These days, the stock might not quite be priced for perfection, but it is priced for success at a price-to-earnings ratio of 35.

Addressing the engineering problems in Meta’s ad platform is imperative to retain advertisers, though it will require investment. Failure to do so risks further erosion of market share to competitors. It’s unknown whether these challenges impacted the company’s first-quarter performance, but there will most likely be some inquiries about them during the first-quarter earnings call on April 24.

Leave a Comment

You may also like