a difficult progression in the metaverse

During a “conference call” about the company’s quarterly results, the CEO has for Meta, Mark Zuckerbergrevealed that the losses in the company’s division specializing in the metaverse (Facebook Reality Labs, FRL) was approximately USD 2.81 billion for the period. Since the beginning of the year, the total losses of this department therefore amounted to 5.77 billion dollars.

Source: Adobe

According to the information presented in the second quarter 2022 earnings report, FRL generated $452 million in revenue during the period, a decrease of 35% compared to the previous quarter. By 2021, the division’s annual losses totaled $10.2 billion. Because this year, if the trend continues, FRL may well set a new record.

Despite his numbers, Zuckerberg reaffirmed his confidence in the social media giant’s direction and remains convinced that the metaverse represents a “massive opportunity.” Facebook had adopted a new strategic direction centered on the exploration of the metaverse, considered the next digital frontier.

However, Zuckerberg acknowledged that FRL’s progress would not be easy and that these losses could continue for the next few years until virtual reality applications and its platform mature enough to take advantage of this opportunity. Moreover, such losses are not unusual for a new sector in the research and development phase. In particular, Zuckerberg said:

“(…) I remain convinced today that the development of metaverse platforms will make it possible to unlock hundreds of billions of dollars, even trillions in the long term (…) It is obviously a business that will be very expensive over the next few years,” he added, however, “I’m sure we’ll be happy to have played an important role in building this project.”

Zuckerberg also noted that the difficult macroeconomic environment could exacerbate the size of FRL’s losses. According to him, the current economic situation has significantly worsened compared to the previous quarter:

“It appears that we have entered a period of economic slowdown that will have a broad impact on the digital advertising industry. In this environment, we are focused on long-term investments that will allow us to emerge stronger. “

Meta’s findings follow a trend of poor performance among major players in online advertising, the business model that underpins much of the Internet economy. Alphabet for example the parent company of Googlealso suffered from a drop in advertising revenue.

Furthermore, according to Zuckerberg’s comments during an internal meeting reported by The Verge, Meta is preparing to meet Apple within the metaverse area, both in terms of philosophy, ideas and logical products. He reportedly said that Meta was positioning itself as a more open and cheaper alternative to Apple.

Meta recently participated in the creation of Metaverse Open Standards Group with Microsoft, Epic games and other big names in technology, aiming to promote the creation of open and interoperable protocols between future immersive 3D worlds with their virtual goods. Apple is absent from the group, a decision that did not surprise Mark Zuckerberg. He explained that Apple’s approach of building tightly controlled hardware and software worked well with the iPhone, but the same strategy may not work for the metaverse.

Meanwhile, Meta’s share price is down just over 43% year-to-date.

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