Meta sees slower user growth in India due to data price hike by telcos

Meta, the owner of Facebook, WhatsApp, Messenger, and Instagram, has seen a slower user growth in India due to the data price hike by telecom operators Reliance Jio, Bharti Airtel, and Vodafone Idea. The company's shares plunged more than 20% on February 2 as Facebook's global daily active users declined for the first time. The social media platform's active user base fell from 1.930 billion in Q3 to 1.929 billion in Q4.

"If you look at kind of the overall user growth landscape for the fourth quarter, we're seeing MAU and DAU in the U.S. and Canada sort of bounce around at sort of expected and indicated given our high level of penetration. And then if you look at the Rest of World, we've seen some headwinds there, kind of little bit unique in the quarter in areas like India, where we saw data plan pricing increase lead to slower growth there. So that's another kind of some unique elements of the quarter on that front," Meta CFO David Wehner said in the company's Q4 earnings conference call.

Wehner also said the company was facing strong competition from rivals particularly with respect to younger audiences. "Let me take the first one, I can take the first one on user growth uses. I think what we said about overall kind of user growth is we're certainly seeing an impact from strong competition, particularly with younger audiences. So that's true, and we're kind of seeing that globally."

He also said that Meta's full year 2021 total revenue grew 37% to nearly $118 billion. Q4 total revenue was $33.7 billion, up 20%. "Unlike the first three quarters of 2021, we experienced a currency headwind in Q4 and had foreign exchange rates remained constant with Q4 of last year, total revenue would have been about $307 million higher," he stated.

The Meta CFO also noted that Q4 total expenses were $21.1 billion, up 38% compared to last year. In terms of the specific line items: Cost of revenue increased 22%, driven primarily by Reality Labs hardware costs, core infrastructure investments, and payments to partners. R&D increased 35%, driven primarily by hiring to support Family of Apps and Reality Labs as well as increased Reality Labs R&D operating costs. Marketing & Sales increased 34%, mainly driven by marketing spend and hiring.

The Q4 operating income was $12.6 billion, representing a 37% operating margin. Net income was $10.3 billion. Capital expenditures, including principal payments on finance leases, were $5.5 billion, driven by investments in data centres, servers, network infrastructure and office facilities. Free cash flow was $12.6 billion.

The revenue from Family of Apps segment was $32.8 billion, up 20%. Q4 Family of Apps ad revenue was $32.6 billion, up 20%. Family of Apps operating income was $15.9 billion, representing a 48% operating margin. "On a user geography basis, year-over-year ad revenue growth was strongest in Asia Pacific at 31%. Rest of World, Europe, and North America grew 28%, 20%, and 15%, respectively. Currency was a modest headwind in all international regions," he added.

"We estimate that approximately 2.8 billion people used at least one of our Family of Apps on a daily basis in December, and that approximately 3.6 billion people used at least one on a monthly basis. Facebook daily active users were 1.93 billion, up 5% or 84 million compared to last year. DAUs represented approximately 66% of the 2.91 billion monthly active users in December. MAUs grew by 115 million or 4% compared to last year. Facebook user growth was impacted by a few headwinds in the fourth quarter. In Asia-Pacific and Rest of World, we believe COVID resurgences during prior periods pulled forward user growth. User growth in India was also limited by an increase in data package pricing. In addition to these factors, we believe competitive services are negatively impacting growth, particularly with younger audiences," he stated.

The revenue from Reality Labs segment has gone up 22% to $877 million in Q4 driven by strong Quest 2 sales during the holiday season. Reality Labs expenses were $4.2 billion, up 48%, driven by employee-related costs, R&D operating expenses and cost of goods sold. Reality Labs operating loss was $3.3 billion in the fourth quarter. For the full year 2021, Reality Labs operating loss was $10.2 billion.

The company expects Q1 2022 total revenue to be in the range of $27 billion to $29 billion, that represents 3% to 11% year-over-year growth. "We expect our year-over-year growth in the first quarter to be impacted by headwinds to both impression and price growth. On the impressions side, we expect continued headwinds from both increased competition for people’s time and a shift of engagement within our apps towards video surfaces like Reels, which monetize at lower rates than Feed and Stories," Wehner said.