Meta may face challenges operating in China, but the company continues to experience significant growth in the world’s second-largest economy. In its recent third-quarter earnings report, Meta revealed a 23% increase in sales compared to the previous year. This growth has proven Meta’s resilience in a tough digital ad market, surpassing its smaller rivals like Snap and X (formerly known as Twitter). The finance chief, Susan Li, highlighted the major role played by Chinese companies in this quarter, further solidifying the trend seen in recent periods. Chinese advertisers are investing heavily in Meta’s platforms, such as Facebook and Instagram, to reach billions of users worldwide.
Meta’s earnings report showed impressive growth across its different geographic regions. The “rest of the world” category demonstrated the strongest growth at 36%. Europe followed closely at 35%, while Asia-Pacific and North America showed growth rates of 19% and 17%, respectively. It is noteworthy that the strong growth in the rest of the world category can be primarily attributed to Chinese advertisers targeting users in Brazil. Meta’s platforms have facilitated increased demand from Chinese advertisers to reach audiences in different markets, further contributing to the company’s overall growth.
Chinese Advertisers Expanding Globally
China’s strict digital blockade has prevented Facebook, along with Google and Twitter, from operating within its borders since 2009. Nevertheless, Meta has managed to navigate this challenge and witnessed a “longer-term trend of overall growth” from the Chinese market. The consistent expansion of Chinese businesses globally has played a significant role in this growth story. As China opens up more and global supply chain challenges ease, Chinese companies are capitalizing on Meta’s platforms as a major advertising tool. The easing of regulations on the gaming industry and lower shipping costs have provided tailwinds for Meta’s growth in China.
Unpredictability and Volatility in the Future
Susan Li cautioned that despite the positive growth trends, volatility in the future remains a potential concern. Various macro factors make accurate predictions challenging. She specifically pointed out the Middle East’s unpredictability due to the recent Israel-Hamas war, which compelled Meta to widen its revenue guidance range. The conflict’s impact was reflected in Meta’s Q4 revenue outlook, as softer ads were observed at the beginning of the quarter. Li’s remarks emphasize the need for Meta to carefully monitor and adapt to unforeseen geopolitical events that can influence the digital ad market.
Although Meta faces obstacles in China, such as the country’s internet restrictions, the growth potential in the Chinese market remains significant. Chinese companies’ willingness to invest heavily in Meta’s platforms, despite Facebook, Instagram, and other apps being inaccessible in China, highlights the global appeal and effectiveness of Meta’s advertising solutions. The ongoing expansion of Chinese businesses around the world presents a considerable opportunity for Meta to continue capitalizing on the Chinese market’s growth.
Meta’s performance in the third quarter showcases its ability to flourish in a competitive and challenging digital ad market. While it may not have direct access to the vast Chinese market, Meta has successfully leveraged Chinese advertisers’ demand, significantly contributing to its overall growth. As the company prepares for future uncertainties, it remains adaptable and watchful of macro factors that could impact its revenue streams. The growth potential in China, coupled with Meta’s strong global presence, positions the company favorably in the ever-evolving digital ad industry.