Mark Zuckerberg, founder and CEO of Facebook — which just rebranded itself with a new corporate name, Meta — is betting the house on what he thinks will be his company’s future: the metaverse.
Though his company may have been pondering the business possibilities of a metaverse as far back as 2018, Zuckerberg made a splash over the summer when he talked up a metaverse as Facebook’s future. In a recent third-quarter earnings report — which included record profits for the company of US$10.4 billion for the three months ended September — Zuckerberg reiterated his commitment to build a metaverse as his company’s “next computing platform.” Then he backed his pledge with US$10 billion of Facebook’s money.
Then came last Thursday’s sudden name change — sending the unequivocal message that Facebook not only embraces a metaverse future, the company now literally defines itself as such in its corporate identity.
Zuckerberg wants to create the next social media platform where people don’t just interact but have entire virtual lives in virtual worlds. In a metaverse, people don’t just communicate but also do things together like go on missions or live out virtual experiences.
The metaverse could help the company accomplish three goals: attract new users, especially the younger generation, increase engagement of existing users, and make the company a lot less dependent on its advertising revenue — US$28 billion in the last quarter or over 97% of total revenue. Facebook’s advertising revenue has especially been threatened by advertising policy changes by Apple — a factor that is causing uncertainty over Facebook’s future earnings, according to the quarterly report.
David Wehner, CFO of Meta Platforms Inc. — the formal new name of the company formerly named Facebook — says the US$10 billion is just the start and that the company is making a significant three-year investment in Facebook Reality Labs, although he did not disclose the total amount. Facebook Reality Labs is responsible for developing augmented and virtual reality-related hardware, software and content.
The announcement comes just weeks after the company pledged a US$50 million investment in global research and program partners to develop its metaverse. The social media giant recently announced 10,000 new jobs in Europe to leverage the continent’s metaverse-building talent.
During the earnings call, Zuckerberg said that building the metaverse is an important part of his company’s strategy. “I view this work as critical to our mission because delivering a sense of presence — like you’re right there with another person — that’s the holy grail of online social experiences,” he said. “Over the next decade, these new platforms are going to start to unlock the kinds of experiences that I’ve wanted to build since even before I started Facebook.”
As the demand for metaverses increases, Zuckerberg expects an increase in the creator community and the amount of digital goods and commerce, such as digital clothes, tools and experiences. “Our goal is to help the metaverse reach a billion people and hundreds of billions of dollars of digital commerce this decade,” he added.
To serve these needs, the company is thinking both broadly and deeply, Zuckerberg said. “We’re building multiple generations of our VR and AR products at the same time, as well as a new operating system and development model, a digital commerce platform, content studios, and of course a social platform.” Andrew Bosworth, a 15-year veteran of Facebook and currently vice president of augmented and virtual reality and head of Facebook Reality Labs, will become chief technology officer of the company next year.
Zuckerberg acknowledged that his company — which has gone all-in with its name change — could take a hit by pursuing the metaverse. “This is not an investment that is going to be profitable for us anytime in the near future,” he said, adding that only later in the decade could their efforts become “more of a real business story.”
But the investment may well be worth it, Kaparthi Jonnalagadda, a crypto investor and metaverse user, told Forkast.News. “Facebook launching its own metaverse is going to be a game-changer,” he said. Considering the company is the world’s biggest social media platform, with 2.9 billion monthly active users as of June, “It is going to be the next big social media,” Jonnalagadda added.
Building a virtual world, fending off trouble in the real one
While third-quarter earnings were record-breaking for Facebook, which was still the company’s name prior to the recent earnings call, revenues of US$29.1 billion were US$1 billion below expectations. According to a Bloomberg report last week, based on leaked internal documents, Facebook use by teens and young adults has been eroding.
In September, the Wall Street Journal reported that Facebook’s internal research in each of three years revealed that its Instagram app was harmful to teenage girls. The revelations were met with outrage, especially as Facebook is preparing to launch an app for kids under age 13.
In recent years, the company as Facebook experienced tough regulatory scrutiny over its ill-fated Libra cryptocurrency project — which Facebook later scaled back and rebranded as Diem.
The company also encountered a barrage of other bad publicity since the 2018 bombshell that Cambridge Analytica used illegally obtained Facebook user data for then-candidate Donald Trump’s successful presidential campaign as well as the fake news that has plagued its news feeds.
In September, the Financial Times reported that Facebook employees have repeatedly urged the company to stop making moderation exceptions for politicians and high-profile individuals. A story by the Washington Post claimed that Zuckerberg personally decided to comply with a request by Vietnam’s ruling Communist Party to censor all dissidents after the party threatened to shut down Facebook in that country.
The Associated Press, the Atlantic, Wired and NBC further reported on more company missteps in hate speech moderation. All these reports emerged after whistleblower Frances Haugen, a former Facebook product manager, released a huge number of Facebook’s internal documents to the Securities and Exchange Commission and the Wall Street Journal. Zuckerberg was defiant in the earnings call and called the recent allegations a “coordinated effort to selectively use leaked documents to paint a false picture of our company.”