Meta plans to lose more money to build the metaverse

Meta plans to lose more money to build the metaverse

Mark Zuckerberg, CEO of Meta Platforms Inc. , Meta Quest Pro during the virtual Meta Connect event in New York, US, on Tuesday, October 11, 2022.

Michael Nagel | Bloomberg | Getty Images

dead CEO Mark Zuckerberg has reiterated his commitment to spending billions of dollars developing the metaverse amid investor concerns about the health of his online ad company’s business.

On a call with analysts as part of the Meta Third Quarter Earnings ReportZuckerberg and other Meta executives answered a number of questions from analysts who appeared increasingly frustrated with the company’s rising costs and expenses, which jumped 19% year-over-year to $22.1 billion during the quarter.

Meta shares fell 19% after the company reported poor guidance for the fourth quarter that missed analyst estimates. Facebook’s parent company’s revenue fell 4% year-over-year to $27.7 billion in the third quarter, while its profit fell 52% year-over-year to $4.4 billion.

The Meta Reality Labs unit, which is responsible for developing virtual reality and related augmented reality technology that supports a metaverse yet to be built, has lost $9.4 billion so far in 2022. Revenue in this business unit is down nearly 50% year-over-year to $285 million. , which Dave Weiner, Meta’s chief financial officer, attributed to “the decline in Quest 2 sales.”

“We expect Reality Labs’ operating losses in 2023 to grow significantly year over year,” Meta said in a statement. “After 2023, we expect to accelerate Reality Labs’ investments so that we can achieve our long-term goal of increasing the company’s total operating income.”

Brent Thrill, an analyst at Jefferies, said during the earnings call that investors are likely to feel as though there are “too many bets versus bets on the core” and asked why Meta thinks bets like the metaverse will pay off.

“I just think there’s a difference between something experimental and not knowing how good it would be,” Zuckerberg said in response. “But I think a lot of the things we’re working on across the suite of apps we’re pretty confident will work and will be good,” he added, citing the company’s work on improving its TikTok-like apps with short video service reels, content recommendation algorithms, business messaging features, and advertising technology. Online.

Although Zuckerberg said he “can’t tell you right now how big it is,” each improvement is “going somewhat in the right direction.”

Zuckerberg said that “it’s clear that the metaverse is a long-term set of efforts that we’re working on” and that he believes “this will end up working as well.”

“There are so many things going on right now at work and in the world that it’s hard to have a simple idea of ​​’We’re going to do this one thing that’s going to solve all the problems,’” Zuckerberg said, seeming amazed.

Zuckerberg explained that Meta faces a number of challenges such as a weak economy, the ongoing effects of Apple’s iOS 2021 privacy update that made it difficult for Meta to target ads to users, and competition from players like TikTok.

He said long-term investments in the metaverse “will provide greater returns over time.”

“I think we’ll resolve each of these at different intervals, and I appreciate the patience and I think those who are patient and invest with us will end up with a reward,” Zuckerberg said.

Zuckerberg acknowledged that part of the reason his company developed the metaverse was to make sure it had a platform in the future that wouldn’t be negatively affected by the decisions of its competitors, such as apple. But the biggest reason Zuckerberg developed the metaverse is because tech companies can be more innovative when they build both the software and hardware that power the computing platform, he said.

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

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