Meta’s Family Of Apps. Img: Pixabay
Meta Platforms, Inc’s (META) revenue consists of 2 major segments and they are Family Of Apps (FoA), and Reaility Labs (RL).
According to Meta Platforms, Inc., the Family of Apps (FoA) business segment gets its revenue primarily from the sales of advertising placements to marketers.
Marketers purchase ads that can appear in multiple places including on Facebook, Instagram, Messenger, and third-party applications and websites.
On the other hand, the Reality Labs (RL) business segment generates revenue from sales of consumer hardware products, software, and content.
These include augmented and virtual reality products that help people feel connected, anytime, anywhere.
For example, the Meta Quest and Facebook Portal are such products and services that help friends and families stay connected and share the moments that matter in meaningful ways with cutting-edge VR hardware, software, and content.
That said, in this article, we will explore not only Meta Platforms’ revenue breakdown by segment but also the profitability and margins of each business sector.
Apart from the sales breakdown, we also get into the growth rates by business segment.
Let’s get started!
Revenue Breakdown, Profitability, And Margin Topics
1. Meta Inc. Revenue Breakdown
2. Family Of Apps Revenue
3. Reality Labs Revenue
4. Revenue By Segment Growth Rates
5. Operating Profit By Segment
6. Operating Profit Margin By Segment
7. Conclusion
8. References and Credits
9. Disclosure
Meta Revenue Breakdown
Meta Revenue Breakdown (click to enlarge)
As mentioned, Meta Inc.’s revenue is broken down into 2 major segments as shown in the figure above and they are Family of Apps (FoA) and Reality Labs (RL).
Family of Apps (FoA) generates sales primarily from advertisement through several platforms, including Facebook, Instagram, Messenger and WhatsApp.
On the other hand, Reality Labs gets its sales through augmented and virtual reality-related consumer hardware, software and content.
Let’s move on to look at the revenue figures.
Family Of Apps (FoA) Revenue
Family Of Apps Revenue (click to enlarge)
Meta’s Family Of Apps which includes Facebook, Instagram, Messenger, and WhatsApp gets its revenue primarily from advertising as shown in the chart above.
In 2021, Meta’s Family Of Apps generated a massive $116 billion in total revenue, a lion’s share of it, notably at $115 billion or 99%, came from advertising.
Total Family Of Apps’ revenue increased 36% in 2021 from the prior year while advertising revenue increased 37% year-on-year.
As of 2022, advertising revenue came in at $114 billion, which was roughly in line with that of 2021.
During the same period, the total Family Of Apps revenue topped $114 billion, also roughly in line with the revenue reported in 2021.
A trend worth talking about is the rising advertising revenue since 2019 which averaged roughly 28% year-on-year and 2021 revenue growth was the best ever reported since 2019.
However, Meta Platforms’ advertising revenue remained stagnant in 2022 from 2021, indicating that revenue growth in this segment may have reached a plateau.
Reality Labs (RL) Revenue
Reality Labs Revenue (click to enlarge)
On the other hand, Reality Labs’ revenue was much smaller than that of the Family Of Apps.
As seen in the chart above, Meta Reality Labs’ revenue came in at only $2.3 billion in 2021, making up roughly 2% of the total revenue.
As of 2022, Reality Labs earned $2.2 billion in sales, down 5% from 2021.
Despite the much smaller revenue figure compared to that of the Family Of Apps segment, Reality Labs’ sales growth rate has been phenomenal.
For example, Reality Labs’ revenue increased 100% in 2021 from 2020, and 127% in 2020 from 2019.
Can Meta’s Reality Labs replicate the same phenomenal growth in 2023?
Probably not as Reality Labs’ revenue has taken a beating in 2022 and dropped 5% year-over-year.
Besides, Meta Inc. has guided for a slightly lower revenue figure for the 1st quarter of 2023 compared to the same period in 2022, according to the 4Q 2022 earning release.
Nevertheless, Meta Inc.’s Reality Labs is a relatively new business segment and may take some time to evolve.
Investors should probably be patient with Meta Inc.’s new initiatives.
Revenue By Segment Growth Rates
Meta Inc Revenue By Segment Growth Rates
From the perspective of growth rates, Meta Inc.’s Reality Labs has had much better year-over-year growth rates since 2019 compared to the Family Of Apps segment.
For example, in 2022, Reality Labs’ revenue growth topped 100% while that of Family Of Apps came in at only 36% in the same fiscal year.
Despite the phenomenal revenue growth reported in 2021 and 2020, both Reality Labs and Family Of Apps’ revenue growth came to a standstill in 2022.
In 2022, Family Of Apps’ revenue declined by 1% while that of Reality Labs declined even further, by 5% year-on-year.
Operating Profit By Segment
Meta Operating Profit By Segment (click to enlarge)
While Meta’s revenue by segment has been on the rise as seen in prior charts, it may not be making any profit.
In this section, we will look at the operating profit by segment to find out the profitability of each business sector.
That said, Meta Inc.’s Family Of Apps has been a profitable business segment while Reality Labs has been unprofitable between 2019 and 2022.
For example, in 2021, Family Of Apps’ operating income totaled $57 billion, up 46% from a year ago.
On the other hand, Reality Labs suffered an operating loss of a massive $10 billion in 2021, roughly 55% worse than the loss in 2020.
In 2022, Meta Inc.’s Reality Labs suffered an even bigger loss, reportedly at $14 billion, or 40% higher than the loss reported in 2021.
Similarly, Meta Inc.’s Family Of Apps segment also had a bad year in 2022.
Despite the massive profit made in 2021, Family Of Apps’s profitability in 2022 seems to be plunging badly.
For example, by the end of 2022, Family Of Apps’ operating income totaled only $43 billion, down 25% from the same period a year ago.
While Family Of Apps’ revenue in 2022 remained roughly in line with that of 2021, it made significantly less profit.
Nevertheless, Meta Inc.’s Family of Apps advertising segment is still a much more profitable business segment than Reality Labs’ hardware and software products.
Operating Profit Margin By Segment
Meta Operating Profit Margin By Segment (click to enlarge)
In terms of margin comparison, Meta Inc.’s Family Of Apps business sector is a significantly more profitable business than Reality Labs as shown in the chart above,
As seen, Family Of Apps’ operating margin totaled 49% in 2021 and represents a growth of 3 percentage points from 2020.
In contrast, Reality Labs’ operating margin slipped to -448% in 2021, driven primarily by the negative operating income.
Despite the negative margin reported in 2021, it was a much better figure compared to the -581% operating margin reported in 2020.
While Meta’s Family Of Apps operating margin has been on a rise, it declined significantly in 2022.
For the 12 months that ended 31 Dec 2022, Family Of Apps’ operating margin tumbled to only 37.3%, down more than 10 percentage points from the same period in 2021.
As advertising represents the largest revenue source within the Family Of Apps sector, the lower margin reported in 2022 was likely coming from a worsening advertising margin.
Similar to the Family Of Apps business sector, the Reality Labs business sector also reported a much worse operating margin in 2022.
As seen, for the 12 months that ended 31 Dec 2022, Reality Labs’ operating margin worsened to -635% or 40% lower compared to 2021.
In short, Meta Inc.’s Family Of Apss and Reality Labs business segments were worse off in 2022 compared to 2021 in terms of margin and profitability.
Conclusion
Meta Platform, Inc., revenue is made up of 2 major segments, Family Of Apps (FOA) and Reality Labs (RL).
Family Of Apps derives its sales primarily from advertising revenue while Reality Labs gets its revenue from virtual reality-related hardware, software, and content.
In terms of revenue figures, Family Of Apps is a much bigger revenue driver compared to Reality Labs and it is also a much more profitable business segment.
Margin-wise, Family Of Apps topped 49% in 2021 and 37% in 20223, representing a decline of more than 10 percentage points over 2021.
Meta Inc.’s Reality Labs has been incurring huge operating losses since 2019, with 2022 being the worse at -$14 billion while the loss in 2023 is expected to be in line with that of 2022.
In short, Meta’s Family Of Apps, or indirectly, the advertising segment, is a profitable business segment and has been making money for the company all these years.
References and Credits
1. Meta Platform, Inc., financial figures are obtained from the company’s annual and quarterly reports which are available in Meta Investor Relations.
2. Image by Gerd Altmann from Pixabay.
Disclosure
The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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