Meta, formerly known as Facebook, is one of the largest technology companies in the world. With over 3 billion monthly active users across its family of apps like Facebook, Instagram, WhatsApp, and Messenger, Meta has enormous costs associated with running its massive digital empire.
How much does it cost Meta to operate?
In 2021, Meta reported total operating expenses of $71.97 billion. This covers all the day-to-day costs of running Meta’s business globally, from research and development to sales and marketing. Meta’s operating expenses have been steadily rising each year as the company expands into new products, features, and growth initiatives.
Here’s a breakdown of Meta’s major operating expense categories and how much was spent in 2021:
| Operating Expense | 2021 Spending |
|---|---|
| Research and development | $27.57 billion |
| Marketing and sales | $14.35 billion |
| General and administrative | $5.53 billion |
| Cost of revenue | $24.52 billion |
Research and development accounts for the biggest chunk of Meta’s operating budget at over $27 billion. This massive investment reflects Meta’s focus on long-term technology development in areas like artificial intelligence, virtual and augmented reality, and the metaverse.
Key factors driving Meta’s operating costs
There are several key factors causing Meta’s operating costs to rise year after year:
User growth
As Meta’s family of apps continue to grow – Facebook alone has close to 3 billion monthly users – the costs of supporting and securing that user base also swell. More data centers, customer support, content moderators, and other infrastructure must be built to handle additional users.
Transition to video
Video content is growing exponentially across Meta’s apps. But storing and delivering video is much more bandwidth and resource intensive than simple text and image content. As video takes up more of Meta’s network, the company has to spend more on serving and hosting that video content.
Investments in new technologies
Meta plows billions each year into emerging technologies that it believes will drive future growth, like virtual and augmented reality hardware and software. For example, Meta’s Reality Labs segment, which develops VR/AR tech, had over $10 billion in operating expenses in 2021.
Security and safety
Keeping billions of users safe and securing user data also adds substantial operating expenses for Meta. The company spends heavily on human content moderators as well as AI technology to detect harmful content and activity across its apps.
Highly competitive landscape
Meta operates in a fiercely competitive industry dominated by the likes of Google, Apple, Amazon, and Microsoft. To keep up, Meta has to constantly improve its products and services, which significantly raises R&D and marketing costs.
Stock-based compensation
As part of compensation packages to employees, Meta issues billions worth of stock-based compensation each year. This adds to the company’s personnel expenses and operating costs.
Revenue vs. Operating Costs
Despite its steep operating costs, Meta generates enormous revenues that comfortably cover its expenses. In 2021, Meta made over $117 billion in total revenue thanks to its massive user base and advertising model.
Meta’s annual revenue vs. operating costs over the last 5 years:
| Year | Revenue | Operating Costs |
|---|---|---|
| 2017 | $40.65 billion | $20.45 billion |
| 2018 | $55.84 billion | $30.94 billion |
| 2019 | $70.70 billion | $46.71 billion |
| 2020 | $86.00 billion | $54.77 billion |
| 2021 | $117.93 billion | $71.97 billion |
This table illustrates how Meta’s revenue has grown at a faster pace than its operating expenses in recent years. In 2021, Meta posted $117 billion in revenue versus $72 billion in operating costs, leaving over $45 billion in profit. Meta’s high profit margins allow it cover its steep costs as it invests in long-term growth.
Recent cost-cutting measures
In late 2022, Meta began implementing cost-cutting measures as its revenue growth slowed amidst economic challenges. Steps it has taken include:
Hiring freezes
Meta has implemented hiring freezes across some corporate groups. This could save billions in employee salaries and benefits if continued.
Reduced budgets
Some Meta teams have seen budgets trimmed by 10-20%, forcing managers to cut discretionary spending.
Facilities downsizing
Meta is subleasing some of its office space and delaying new construction projects as its headcount growth stalls.
Executive pay cuts
Top executives like Mark Zuckerberg and Sheryl Sandberg took pay cuts in 2022, reducing Meta’s salary costs.
While modest compared to Meta’s enormous expense base, these cuts represent efforts to rein in costs and boost profitability as economic challenges loom.
Future operating cost outlook
Looking ahead, Meta’s operating expenses will likely continue climbing over $80-100 billion per year as it invests heavily in the next computing platform of the metaverse. Video will make up an ever-increasing share of Meta’s network, adding to infrastructure costs. Attracting the next billion users could require billions more in subsidies and promotional offers.
On the revenue side, Meta faces headwinds like Apple’s ad-targeting restrictions which are slowing Meta’s ad business. But with some of the most popular apps and technologies in the world, Meta is well positioned to weather economic storms while continuing to deliver value to billions of users globally.