Meta-profits reveal the fortune Mark Zuckerberg is pouring into the metaverse

Is the metaverse a money pit?

For the first time, Meta has revealed the billions of dollars it is spending building a 3D virtual world as it seeks its next area of ​​growth, placing a massive bet on what Mark Zuckerberg has said is “the successor to the mobile internet”.

Shares of the company plunged as much as 22% in after-hours trading after it missed Wall Street earnings estimates, released weaker-than-expected guidance and revealed Facebook’s daily active users fell. slipped for the first time in the company’s 18 years. story of the year.

Amid muted prospects for the world’s biggest social media company, earnings revealed just how far Mr Zuckerberg will take his vision for the metaverse to a reality.

The company’s Reality Labs, which develop hardware, software and consumer content related to augmented and virtual reality, lost $21.3 billion over the past three years.

In 2019, it lost $4.5 billion on $501 million in revenue. In 2020, it reported a net loss of $6.62 billion on $1.14 billion in revenue and in 2021, $10.9 billion on $2.27 billion.

During the earnings call on Wednesday, Meta CFO David Wehner said research and development was up 35%, thanks in part to Reality Labs as well as higher operating costs. for this part of the business. He added that he expects this level of spending to continue.

“While the data isn’t flattering right now, R&D is rarely a money-making operation,” said Cathy Hackl, Metaverse Manager at Futures Technology Group and Metaverse Evangelist. The National.

“I see Meta focusing on Meta Reality Labs as their bet is to figure out what the future of the business is and understand that their current ad revenue business model may need to change as growth with d “Other parts of the business are starting to flatten out or sluggish and we’re heading into a Web3 era.”

As to whether this massive expense is discouraging the wider tech community working on Web3, she said Meta isn’t “the only player.”

“A lot of us are working on a more open and maybe decentralized metaverse, so I’m actually very pro-topian about the future.”

Still, there’s no denying the blank check nature of Meta’s most daring projects – and its ability to nudge smaller players to the side. Even after falling 20% ​​in after-hours trading, the company’s market capitalization was nearly $900 billion as of Wednesday’s market close.

Still others are more skeptical that Meta’s foray into virtual worlds will even pay off.

AR and VR demand more data, beyond the reach of huge populations in developing countries who can easily call the much lighter Facebook app on their devices. And some of the AR or VR experiences require the all-encompassing use of clunky headwear.

Virtual reality and augmented reality applications are also even better aligned with business-to-business applications such as healthcare – as in remote surgery – or energy, to monitor assets.

Because of these requirements, it may simply have a smaller addressable market – or a market that Meta is simply not equipped for.

Tom Goodwin, author of Digital Darwinism, said The National the metaverse is too niche, catering to a gaming community rather than the average person.

“I think there will be people falling on one side of the threshold, and on that side it’s fine to walk around and watch a bird and brush a stone in a pond, and there will be ‘other people who think online games are amazing and can do all kinds of things that they couldn’t do otherwise,’ he said.

“I’m personally a huge fan of reality,” he added. “I’m a little worried about how some of this stuff is going.”

Ayesha Khan contributed to this report

Updated: February 3, 2022, 10:04 a.m.