Facebook parent Meta Platforms (META -1.41%) whiffed on its third-quarter results last week, sending the stock sharply lower on Thursday. Specifically, a 4% year-over-year decrease in net revenue was paired with a 46% decline in operating income. The development of its metaverse is proving very, very expensive, and spending on the project isn't abating anytime soon.

But that news isn't the piece of last quarter's report that should bug current and prospective Meta shareholders the most. Indeed, not even slumping per-user revenue and slowing user growth is an overwhelming worry just yet.

Rather, the biggest red flag quietly waving within its third-quarter numbers is how little Meta has to show for a marked increase in its selling and marketing spending. Consumers and advertisers alike just aren't responding like they used to.

Less bang for Meta's buck

Don't misread the message. Investors should be asking if the metaverse's eventual potential justifies the costs to date. Meta's got a more immediate problem to solve, however, which might make its metaverse efforts moot. That is, why did the company's advertising revenue fall at all when spending on sales and marketing spending expanded as it did?

The graphic below puts things in perspective. Sales and marketing outlays grew to a record-breaking Q3 figure of just under $3.8 billion. It didn't help ad revenue grow in the least. Indeed, as a percentage of its total top line, these expenditures jumped back to nearly 14% of Meta's total sales, which is the highest it's been in over two years. 

Meta spent more on marketing in Q3, but the added spending didn't grow revenue.

Data source: Thomson Reuters. Chart by author. All dollar figures are in millions.

Connect the dots. Wider profit margins should be a result of greater scale, and greater scale should be the result of a well-run, growing business. The bulk of any marketing-efficiency gains made during and because of the COVID-19 pandemic, however, are now being whittled away. They have been for a while, in fact.

It's a particularly odd detail in light of another factor -- a fresh round of tough political races. Election years are generally good ones for Facebook, as it's been a venue where candidates can effectively sway voters. This time though, campaigns aren't as interested in leveraging the social media platform's reach.

2 explanations for this issue

There's a lot to consider here, but two implications of this not-so-small detail stand out among the rest.

First, it's arguable the increased marketing and advertising expense simply reflects the rising costs of both. Inflation remains rampant, and neither sales personnel costs nor advertising space is immune to these pricing pressures.

The second and more serious implication is this -- maybe Facebook just isn't what it used to be.

People will argue this idea, pointing to last quarter's rekindled growth of Facebook's daily and monthly user headcounts. Average revenue per user still fell, though, particularly in the important North American market. It's a hint that overall engagement of those users is waning, jibing with numbers from eMarketer. The digital market research outfit estimates this year's average usage of Facebook among U.S. adults will slide to just over 30 minutes per day, down from 2017's peak of more than 40 minutes.

The amount of time users spend at Facebook continues to decline.

Data source: eMarketer/Insider Intelligence. Chart by author.

In simpler terms, Meta's flagship social media platform is no longer doing more with less. It's doing less with more. The bigger and older Facebook gets, the more the world appears to be losing interest.

Time for tougher questions, and better answers

It's just one quarter, of course, and hardly a prediction of Meta's demise. Perhaps the company just didn't see the severity of the slowdown brewing for the digital advertising industry. Google parent Alphabet and Snap -- the name behind social media app Snapchat -- certainly surprised their shareholders by bumping into the same headwind.

If last quarter's ineffective spending on sales and marketing is a glimpse at Meta's new norm, though, it's cause for concern.

See, the company may simply not have room in its budget to spend more promoting its platform. Its overall cost of revenue is creeping higher as well, along with general and administrative spending. And, this is all happening at the same time its research and development costs are soaring. There's not a lot of money left after paying all of its bills of late compared to the windfall profits reaped in the midst of the pandemic.

Meta is spending more and more and earning less and less.

Data source: Thomson Reuters. Chart by author. All dollar figures are in millions.

Bottom line? Meta just isn't getting the bang for its buck it used to. This could be just a function of how quickly the economy tanked last quarter. But, it wouldn't be wrong to wonder if this aging platform is becoming tougher to sell to consumers as well as advertisers. Be skeptical.