Published on: 27/10/2022

Meta: Zuckerberg willing to lose more money to establish metaverse

Meta, formerly known as Facebook, has reaffirmed its intention to invest billions of dollars in developing the metaverse. Meta CEO Mark Zuckerberg made the remark while responding to serious concerns about the well-being of his company’s online advertising business.

During a conference call with analysts to discuss Meta’s third-quarter earnings report, Zuckerberg and other Meta top executives received a number of questions from analysts who sounded extremely agitated with the company’s soaring costs and expenses, which increased 19 percent year over year to $22.1 billion during the quarter.

Meta shares fell 19 percent in extended trading on Wednesday after Facebook’s parent issued a weak forecast for the fourth quarter and fell far short of Wall Street’s earnings expectations. In the third quarter, Facebook’s revenue plummeted 4 percent yearly to $27.7 billion, while profits nosedived 52 percent yearly to $4.4 billion.

Meta’s Reality Labs unit, which is in charge of creating the virtual reality that will support the building of the metaverse, has already lost $9.4 billion in 2022. According to Meta chief financial officer Dave Wehner, revenue in that business unit plunged nearly 50 percent year on year to $285 million year on year, owing to “lower Quest 2 sales.”

“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Meta wrote. “Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”

Brent Thrill, an analyst at Jefferies, said during the earnings call that investors were likely concerned about “too many experimental bets versus proven bets on the core,” and he inquired about the outcome of such a bet.

“I just think that there’s a difference between something being experimental and not knowing how good it’s going to end up being,” the billionaire said.

“But I think a lot of the things that we’re working on across the family of apps, we’re quite confident that they’re going to work and be good.”

He highlighted the company’s efforts to improve its TikTok-style Reels short-video service, content-recommendation algorithms, business messaging features and online advertising technology.

The 38-year-old entrepreneur said that he “can’t tell you how big they’re going to scale to right now,” but he was confident that each advancement is “kind of going in the right direction.”

Meta’s difficulties

Zuckerberg admitted that Meta was facing a number of difficulties, including a weak economy, the aftereffects of Apple’s 2021 iOS privacy update, which made it harder for Meta to target ads to users, and competitive pressure from TikTok.

“I think we’re going to resolve each of these things over different periods of time, and I appreciate the patience and I think that those who are patient and invest with us will end up being rewarded,” Zuckerberg said.

One of the reasons Zuckerberg’s company is developing the metaverse is to guarantee that it owns a platform that will not be influenced by its competitors’ decisions in the long run.

Furthermore, Zuckerberg claims that another primary reason he is developing the metaverse is so that tech firms can be more revolutionary when they build both the software and hardware that reinforce a computing platform.

“A lot of this is just you can build new and innovative things by when you control more of the stack yourself,” Zuckerberg said.

Meta reported 197 million daily active users in the United States and Canada during the quarter, up from 196 million in the same quarter in 2020. The majority of Meta’s revenue comes from users in North America.