wave goodbye to the Year of Efficiency

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

This week marks one year since Elon Musk bought Twitter/X. It is fair to say any hopes of a glorious revival have come to nothing. Dwindling advertising revenue makes X an outlier in social media. Elsewhere, digital advertising is staging a comeback. 

YouTube revenue has recovered after a series of downbeat quarters. Snap just reported 5 per cent sales growth after two consecutive quarters of decline. On Wednesday, Meta outshone them all with a 23 per cent gain. 

The scale of Meta’s popularity is worth remembering. Facebook.com is the third most-visited website in the world, according to Similarweb. Across its various platforms, Meta has more than 3bn active daily users. For comparison, X has an estimated 245mn. Start-up rivals cannot gain traction. Pebble is planning to close less than a year after it launched. 

Adding new users is a feat, even if those new users are not pulling their weight in revenue terms. At $8.71, Meta’s revenue per user has dipped since late 2021.

But revenue is not the sole reason Meta’s share price is up 140 per cent in the year to date, comfortably outpacing the wider S&P 500 index. Cost- cutting is the real hero. Meta’s workforce is almost a quarter smaller than it was this time last year. Costs and expenses have dropped 7 per cent year over year while revenue has jumped. The result is a huge 40 per cent operating profit margin. 

But if Meta’s winning streak depends on low spending, it may not last. At most, the company expects total expenses this year to be 1.5 per cent higher than last year. Next year, however, they could jump 11 per cent.  

This is not just the fault of Meta’s vastly expensive bet on virtual reality. Though a $3.7bn operating loss for the Reality Labs division means the business has racked up more than $46bn in losses in less than five years.

Next year, however, the money pit will be artificial intelligence. As well as using AI for its advertising business, Meta is rolling out consumer tools. It will be the company’s biggest investment area. The year of efficiency is about to make way for the year of AI.