Mark Zuckerberg wants to spend big on the metaverse

Mark Zuckerberg wants to spend big on the metaverse

Facebook’s metaverse Mark Zuckerberg

Mark Zuckerberg told the world last October that he was all in on the metaverse, and that the endeavor that would only get more expensive over time. Now that his company’s stock price has been hammered in recent months, he is dialing back that rhetoric.

Meta will “slow the pace of some of our investments” due to “our current business growth levels,” Zuckerberg said during the company’s first-quarter earnings call Wednesday. Meta’s profits for the first quarter were $7.5 billion, down 21 percent from the year-ago period. Revenue rose 7 percent to $27.9 billion, the slowest growth rate since the company went public a decade ago. Its target expense range for 2022 was lowered by $3 billion.



Sometimes a stock price tells the story. In the case of Meta, its price has plummeted nearly 50 percent, evaporating the last five years of growth, since it rebranded from Facebook last October. That was when Zuckerberg revealed he was already spending $10 billion a year on Reality Labs, and that he expected the investment to grow despite not seeing a return until at least the latter half of this decade.

If his core business of ad-driven social media was growing like it was in years past, investors might have responded positively to the Meta pivot. But the timing couldn’t have been worse: Facebook is growing slower than ever, thanks in large part to younger users fleeing the service. TikTok is eating into time spent on both Facebook and Instagram. And Apple’s ad tracking changes have already cost Meta more than $10 billion in lost revenue. Meanwhile, regulators have blocked Zuckerberg’s ability to make big, transformative acquisitions in social media that could jumpstart growth again.

Facebook is still growing, but slower than ever. After reporting its first-ever drop in daily users for the fourth quarter of 2021, the blue app managed to grow daily users by just 4 percent to 1.96 billion last quarter, while daily users across Instagram, WhatsApp, and Facebook ticked up slightly from 2.82 billion to 2.87 billion. With expectations already set low by Wall Street, Meta’s stock price shot up more than 15 percent after it reported better-than-expected earnings per share in the first quarter.

“Meta’s ad business continues to face some very real challenges,” said Jasmine Enberg, a principal analyst at Insider Intelligence. “Facebook, of course, is no stranger to obstacles, but the iOS changes are the first direct threat to its ad business. Combined with the rise of TikTok, brand safety concerns, and a shift in social media user behavior, there’s a perfect storm heading straight for Meta’s ad revenues.”

It’s clear that, in the short term, Zuckerberg believes that copying TikTok will revive its growth. He said Wednesday that the company’s short-form video product, Reels, accounted for 20 percent of time spent on Instagram, and that video consumption was already more than half the time spent on Facebook. Meta is early in monetizing Reels with ads, but it is following the same playbook Zuckerberg used to successfully copy Snapchat’s Stories feature.

For Reality Labs, Zuckerberg said the next major hardware product would be a high-end mixed reality headset codenamed Cambria later this year. He said Cambria will focus on “work use cases and eventually replacing your laptop or work setup.” (Apple has its own mixed reality headset coming soon that, if I had to guess, Zuckerberg wants to get out ahead of.)

Outside of new hardware, Meta is readying a web version of its Horizon social platform that currently only exists on the Quest headset. That will put Horizon in more direct competition with 3D gaming-meets-social apps like Fortnite, Roblox, and Rec Room. Zuckerberg said Horizon would also be integrated more tightly with the Quest in a coming software update, solidifying it as a lynchpin bet. Meta takes a healthy percentage of virtual goods sold in Horizon but has yet to introduce an ads system.

News source 

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