Meta, the parent company of Facebook and Instagram, has been facing bans and restrictions on operating in China. However, this has not hindered its growth, as the company reported a significant increase in sales during the third quarter of the year. With a 23% rise in sales compared to the previous year, Meta has demonstrated its resilience in a tough digital advertising market, outperforming smaller rivals like Snap and X (formerly known as Twitter).
Chinese Companies Driving Growth
During an earnings call, Susan Li, Meta’s finance chief, emphasized the role of Chinese companies in fueling Meta’s growth. Chinese advertisers have been investing heavily in Meta’s platforms, leveraging the vast user base of Facebook and Instagram to target customers in markets around the world. This trend has been particularly prominent in online commerce and gaming sectors.
Expanding Beyond China’s Borders
The growth in Meta’s revenue was largely driven by its expansion into new geographic regions. While the rest of the world category showed the strongest growth at 36%, Europe and Asia-Pacific followed closely behind with growth rates of 35% and 19% respectively. North America experienced a growth rate of 17%. Interestingly, the growth in the rest of the world category was attributed to Chinese advertisers targeting users in Brazil, contributing to the region’s acceleration.
Despite the overall growth from the China market, Meta acknowledges the potential for volatility in the future. Various macro factors, such as geopolitical tensions, can impact the advertising landscape. Susan Li highlighted the unpredictability caused by the Israel-Hamas war in the Middle East, which led Meta to widen its revenue guidance range. Meta’s fourth-quarter outlook has been affected by softer ads at the start of the conflict, aligning with the company’s cautious approach.
The Impact of Covid-19 and Supply Chain Challenges
Over the past two years, Meta faced challenges related to higher shipping costs caused by the Covid-19 pandemic and strict lockdown rules in China. However, as China gradually reopened and global supply chain issues eased, Chinese companies saw an opportunity to expand their businesses internationally. Meta’s platforms became instrumental tools for Chinese advertisers to target global audiences. The reduction in shipping costs and the easing of gaming industry regulations have further facilitated this expansion.
Susan Li stressed that predicting the future remains challenging due to numerous macro factors at play. Nonetheless, Meta remains optimistic about the long-term growth potential while acknowledging the possibility of volatility. The company continues to adapt to changing dynamics and explore new opportunities to leverage its platforms effectively.
Despite being barred from operating in China, Meta has experienced remarkable growth driven by Chinese advertisers. By capitalizing on the vast user base of Facebook and Instagram, Chinese companies have successfully expanded their reach to global markets. This expansion has come with its share of challenges, including geopolitical uncertainties and pandemic-related disruptions. However, Meta remains resilient and adaptive, positioning itself for long-term success in an ever-changing digital advertising landscape.