Meta Is Stuck on Advertising: Why Diversification Isn't Working

Meta is stuck on advertising. Despite investing in AI, subscriptions, and virtual reality, the company remains almost entirely dependent on ad revenue.

The problem with a single-engine model

Last year, 97.6% of Meta's revenue came from advertising. Put another way, out of every 100 rubles in revenue, 97.60 came from ads placed on Facebook, Instagram, and the company's other platforms. The remaining 2.4% came from subscriptions (Meta Verified), cloud services, and experimental projects.

For comparison, Apple earns roughly equal shares from hardware (iPhone, MacBook), services (Apple Music, iCloud), and its ecosystem. Netflix runs on content subscriptions. Microsoft has spread its revenue across cloud (Azure), software (Microsoft 365), and gaming (Game Pass). Meta remains locked into the classic model, and that's risky.

Why diversification isn't working

Meta really is pouring huge sums into new areas. Reality Labs (VR/AR) has received multibillion-dollar investments; the company has spent more than $16 billion building out the metaverse. AI tools are built into Facebook and Instagram, and the company has launched subscriptions on top of them (Meta Verified, Premium on Facebook). But none of it brings in enough revenue to dent advertising's dominance.

There are several reasons the new businesses are growing slowly:

• Advertising still works flawlessly: a base of 3 billion users across Facebook, Instagram, and WhatsApp drives enormous advertiser demand, and prices keep rising
• A tough competitive landscape: AWS and Azure dominate cloud, Netflix and Apple dominate subscriptions, and the VR market hasn't matured yet
• Long payback periods for new projects: Reality Labs has been losing money for years, and AI services are only starting to be monetized
• Used to scale: when the current model generates $115+ billion in annual revenue, it's harder to invest in entirely new areas with uncertain returns

What investors are discussing

Concern on financial markets is growing. If regulators seriously restrict data collection (Europe is already doing this through GDPR and the Digital Services Act), or if ad demand falls during a recession, Meta will find itself in a vulnerable position. The company is making enormous sums right now, but its dependence on a single source of revenue remains a systemic risk.

"When one business model works very well, it's hard to get an organization to invest in alternatives.

It's the classic success trap."

What it means

Meta talks about moving away from advertising, but in practice it depends on it completely. While other big tech companies have successfully diversified (Apple, Microsoft, Google), Meta keeps 97% of its eggs in one basket. In a fast-changing world of new regulations, economic cycles, and AI competition, that's a dangerous strategy.

*Meta is designated an extremist organization and banned in Russia.