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Meta plans to lose even more money building the metaverse

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Meta Platforms Inc. CEO Mark Zuckerberg will demonstrate Meta Quest Pro at the virtual Meta Connect event in New York, USA on Tuesday, October 11, 2022.

Michael Nagle | Bloomberg | Bloomberg | Getty Images

meta CEO Mark Zuckerberg reiterated his commitment to spend billions on developing the Metaverse amid investor concerns about the health of the company’s online advertising business.

On a call with an analyst as part of Meta’s Third quarter earnings reportZuckerberg, and other Meta executives answered a number of questions from analysts.

Meta shares fell 19% after the company reported weak fourth-quarter guidance below analyst estimates. earnings of $4.4 billion, down 52% year-over-year.

Meta’s Reality Labs division, responsible for developing virtual reality and the related augmented reality technology that underpins the yet-to-be-built Metaverse, has lost $9.4 billion so far in 2022. Meta’s chief financial officer, Dave Wehner, believes this is the reason for the “declining sales of Quest 2.”

“We expect Reality Labs’ operating loss to increase significantly in 2023 year-over-year,” Meta said in a statement. “From 2023 onwards, we plan to pace our investment in Reality Labs to meet our long-term operating profit growth goals for the company.”

Jefferies analyst Brent Thrill said on the earnings call that investors likely felt that there was “too much experimental betting and betting on proven cores,” adding that experiments like the Metaverse I asked him why Meta believes that such bets will pay off.

“I think there’s a difference between being experimental and not knowing how good it will end up,” Zuckerberg said. I’m sure a lot of the things we’re working on will work and work well,” he added, adding that short video services like TikTok, their content recommendation algorithms, business messaging capabilities, and online advertising technology will be rolled out to reels. To do.

“We don’t know at this point how big they’ll be,” Zuckerberg said, but each improvement “kind of goes in the right direction.”

“Obviously, the Metaverse is a long-term set of initiatives we’re working on,” Zuckerberg said, adding that “it’s going to pay off in the end, too.”

“There’s so much going on in business and in the world right now that it’s hard to come to the simple conclusion that ‘do one thing and you’ll solve all your problems,'” Zuckerberg said. ‘ said. .'”

Meta faces a number of challenges, including a weak economy, the lingering impact of Apple’s 2021 iOS privacy update making it harder for Meta to target ads to users, and competition from players like TikTok. Zuckerberg explains.

A long-term investment in the Metaverse “will yield greater returns over time,” he said.

“I think we’ll work through each of these issues at different timeframes,” Zuckerberg said.

Zuckerberg has admitted that part of the reason his company is developing the Metaverse is to ensure that it has a future platform that will not be adversely affected by rival decisions. appleBut a bigger reason Zuckerberg is developing the Metaverse, he said, is that technology companies are more innovative when they build both the software and hardware that underpin their computing platforms.

“A lot of this is that having more of the stack under your control allows you to build new and innovative things,” Zuckerberg said.

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