The metaverse might be a virtual reality, but the money Meta is losing through it is certainly real.
Meta, the parent company of Facebook, revealed its Q3 2022 financial results on Thursday. This outlined falling revenue, stagnant users and huge losses through Meta’s big bet on the metaverse.
Following the reveal of the troubling figures, shares in Facebook dropped by about 20 percent.
In October last year, Facebook rebranded itself as Meta and outlined an all-in focus on virtual reality through the metaverse. It has since launched an internal division focusing on this, dubbed Reality Labs.
The financial results reveal that Meta lost $US3.7 billion ($5.7 billion) through Reality Labs in the third quarter of 2023, up from losses of $US2.6 billion ($4 billion) this time last year. And Facebook chief financial officer David Wehner said this will only get worse going forward.
“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Wehner said.
“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.”
Reality Labs posted revenue of $US285 million ($439 million) representing a near-50 percent drop from the same quarter in 2021.
Speaking on an investor call following the release of the financials, Meta CEO and Facebook founder Mark Zuckerberg acknowledged criticisms of the huge investments in the metaverse but said it will pay off in the long run.
“Over time, these are going to end up being very important investments for the future of our business,” Zuckerberg said.
“This is some of the most historic work we’re doing. People are going to look back on [this] decades from now and talk about the importance of the work that was done here. I think our work is going to be of historic importance and create the foundation for an entirely new way we interact with each other and blend technology into our lives, as well as a foundation for the long-term business.”
Overall, Meta’s net income was down more than 50 percent year-on-year, falling to $US4.4 billion ($6.8 billion) this quarter, compared with $US9.2 billion ($14.1 billion) this time last year.
In terms of Meta’s “family of apps”, including Facebook, revenue was down 4 percent to $US27.4 billion, and its ad revenue fell from $US29 billion last year to $US27.7 billion this quarter.
Meta has confirmed that it plans to maintain its current workforce size, with some teams to shrink and others to grow.
“We’re approaching 2023 with a focus on prioritisation and efficiency that will help us navigate the current environment and emerge an even stronger company,” Zuckerberg said.
“While we continue to navigate some challenging dynamics – a volatile macro economy, increasing competition, ad signal loss and growing costs from our long-term investments – I have to say that our product trends look better from what I see than some of the commentary I’ve seen suggests.”
A recent New York Times report revealed Reality Labs’ “rocky start”, with claims of its flagship game being “buggy and unpopular” and of strategy shifts made on the “whims” of Zuckerberg, leading to internal disagreements.
According to the Wall Street Journal, that flagship game – Horizon Worlds – has less than 200,000 monthly active users, a figure which is less than half of the company’s original goal for the end of 2022.
The tech giant’s metaverse play is also facing legal troubles, with the US Federal Trade Commission filing a legal injunction aiming to prevent it gaining a metaverse monopoly.
The injunction relates to Meta’s acquisition of virtual reality content company Within Unlimited, best known for its VR fitness app.
The purchase was announced last year, the day after Meta’s name change was unveiled.