The Metaverse of the huge loss of tens of billions of dollars Meta is a bit “collapsed”

The super-rich Zuckerberg’s Metaverse development plans have suffered a setback.

The Metaverse of the huge loss of tens of billions of dollars Meta is a bit "collapsed"

On Friday, Eastern Time, the three major U.S. stock indexes opened higher and moved lower. As of the close, the Dow fell 1.43% to 34,738.06 points, and the Nasdaq fell 2.78% to 13,791.15 points. Large U.S. technology stocks fell across the board. Apple fell 2.02%, Amazon fell 3.59%, Google fell 3.13%, Microsoft fell 2.43%, and Meta (formerly Facebook) continued the previous downward trend and fell 3.74%.

The data shows that since entering 2022, Meta’s stock price has fallen by as much as 34.73%, and the current stock price is $219.55, a drop of 42.87% from the 2021 high of $384.33.

According to public information, the growth of Meta2021’s main advertising business has shown signs of weakness. At the same time, the development department of Metaverse has also caused the company to suffer losses of tens of billions of dollars, and its performance is significantly lower than market expectations. In October 2021, Facebook announced that starting from the fourth quarter of 2021, the “Reality Lab” section representing the Metaverse business will be listed separately; from the subsequent data disclosure, Meta will be in the Reality Lab in fiscal 2021. The segment had revenue of $2.27 billion and an operating loss of $10.19 billion.

Affected by this, Zuckerberg’s personal wealth has dropped by nearly 40 billion US dollars since the beginning of this year, a shrinkage of more than 30%, and he has fallen out of the top ten of the world’s richest list.

The first “Metaverse” financial report suffered a huge loss of tens of billions

A few days ago, the US technology giant Meta announced a less-than-expected financial report. The company’s “Metaverse” division lost more than $10 billion in the past year, according to earnings reports.

This triggered a large-scale sell-off in the market. Meta’s stock price plummeted 26.44% on Thursday, and its market value shrank by $234 billion, setting a record for the largest single-day decline in U.S. stock history, surpassing Apple’s one-day loss of 182 billion in September 2020. dollar record.

The Metaverse of the huge loss of tens of billions of dollars Meta is a bit "collapsed"

This is Meta’s first earnings report since launching its “Metaverse” strategy. The financial report covers two parts: one is the “application family”, including Facebook, Instagram, Messenger, WhatsApp and other services; the second is FRL (Reality Labs, Facebook Reality Lab), including AR/VR-related hardware, software and other service.

The Reality Labs division, established in 2018, mainly researches VR/AR technologies and products. Its hardware product, Quest 2, is one of the best-selling VR devices on the market. Reality Labs’ revenue in the fourth quarter of 2021 was $877 million, a year-on-year increase of 22.3%, but the operating loss also reached $3.304 billion, and the business contributed only 2.6% of the company’s revenue in the fourth quarter. In 2019 and 2020, Reality Labs had revenue of $500 million and $1.14 billion, respectively, and losses of $4.5 billion and $6.6 billion, respectively. Meta expects a “significant increase” in operating losses in 2022.

Reality Labs lost $3.3 billion in the fourth quarter of last year alone, nearly double what Google invested in its emerging technology business unit. Meta said last year’s $4.2 billion loss was driven by staff costs, research and development and sales costs.

It is reported that Meta has invested in 24 companies involved in the “Metaverse” field, most of which are game companies and start-ups related to VR/AR hardware. However, its full-year revenue was only $2.27 billion, with losses of $4.5 billion, $6.62 billion and $10.19 billion in 2019, 2020 and 2021, respectively.

Previously, Zuckerberg said that in the next three years, the company’s focus will be on product and improvement and infrastructure construction. That is to say, Meta’s Metaverse business requires long-term capital investment, and the investment period will inevitably lead to an increase in costs and expenses. , the possibility of short-term profit is very small. Meta expects a “significant increase” in operating losses from Reality Labs’ Metaverse business in 2022.

No matter how much the outside world is hyping up the Metaverse, investors are more concerned about how far this virtual world has been built? When will a large amount of investment generate scale income?

“We will continue to invest in those key priorities in 2022, while working to build the Metaverse. We will focus on the foundational hardware and software needed to build an immersive, tangible Metaverse to achieve more than anything available today. A good digital social experience.” Zuckerberg said on the earnings call that the total user spending on the Oculus content market has reached the $1 billion level, which has helped virtual reality developers expand and maintain their business.

However, the prospect of the Metaverse is attractive, but it is still in the early stage as a whole. From the current status of computing power conditions, network technology, and extended reality, the industry still needs 10 to 20 years of development time.

Three challenges facing Meta

Competition: Zuckerberg mentioned TikTok five times during the first earnings call in 2022, admitting that TikTok’s competitive pressure on Meta is increasing, and even admitting that Meta is losing young users, but at the same time, he still insists that he will increase his commitment to the Metaverse business investment. At the same time, Zuckerberg told employees that the sharp drop in the company’s stock price stemmed from a weak first-quarter revenue outlook and that it was important to focus on the growing Meta short video product.

It is reported that TikTok first appeared on Meta’s earnings conference call in the first quarter of 2021, and in an analyst question; until the third quarter of 2021, no Meta executives mentioned the short video platform, But at the time Zuckerberg acknowledged in his prepared remarks that TikTok was “one of the most effective competitors we have ever faced.”

In the “2022 Mobile Market Report” released by App Annie, social data is also unexpected and supports this reality. The report notes that Gen Z is indeed the Instagram (and TikTok) generation, heavily skewed towards photo and video, entertainment, education and social apps, with TikTok making a strong move into the top five in five major global markets.The agency predicts that its monthly active users will exceed 1.5 billion this year, indicating it is still rising.

Product shift: Meta announced last quarter that it was changing its internal goals from attracting total users to focusing specifically on young people. Zuckerberg said: “We also expect to make significant changes to Instagram and Facebook, leaning further towards video and making Reels a more central part of the experience. Over the past decade, the audience using our apps has grown a lot. , and we’re focused on serving everyone, our services have been tuned to be best for the majority of the people who use them, not specifically for young adults.”

It’s worth noting that Zuckerberg has now made it clear that this change will also come to Facebook, despite the dominance of older users. As radical as this may sound, Facebook is gradually ditching the social nature of social media, at least as far as feeds are concerned; however, this is also the way products are following the usage of younger generations, who have moved these interactions to IM software such as Facebook Messager superior.

Decline in advertising effectiveness: Meta is the second largest digital advertising platform in the world after Google. In Q4 2021, Meta advertising revenue was US$32.639 billion, a year-on-year increase of 20%. Compared with the first three quarters of last year, the revenue growth rate slowed down significantly .

In its third quarterly report last year, the company warned that it faced “significant uncertainties” in the fourth quarter due to privacy changes in Apple’s operating system, continued macroeconomic and epidemic blows. Last April, Apple launched the App Tracking Transparency (ATT) privacy feature. Under the ATT framework, it will be difficult for advertisers to obtain IDFA (Device Advertising Identifier) ​​to identify user devices. Apps can use IDFA for ad targeting and attribution only if the user actively clicks “authorize consent”.

This means that companies such as Facebook and Snap, which rely on mobile device advertising, will not be able to accurately measure and optimize iOS advertising, limiting performance advertising and reducing industry profits. In contrast, Google and e-commerce giant Amazon, as online advertising platforms of the same magnitude, have been minimally affected. On February 2, Google’s parent company Alphabet announced its Q4 financial report. Its advertising revenue rose against the trend. In the quarter, advertising revenue including Google search and YouTube reached US$61.2 billion, a year-on-year increase of 32.55%.

US media complain: Meeting in the Metaverse all day? like a nightmare

According to foreign media reports, the concept of the Metaverse has recently taken the technology world by storm.Companies like Meta, the parent company of Facebook, are planning to enter the Metaverse business. But their vision of the Metaverse is either already there, vague, or something no one really wants, and doesn’t make much sense.

Imagine that users could live in such a virtual world. You can enter the virtual world at any time, create a digital image of yourself, and roam the virtual world with friends; you can collect equipment and develop new skills, and fight computer-controlled digital monsters; you can marry, join a community, and Those who never know their real names build relationships. And there’s no limit to it all, you can live in fantasy and sci-fi.

If you tell a few VCs about this idea now, saying this is a whole new Metaverse market, it might even raise $100 million.But what they didn’t know was that such a virtual world, once called a Multiplayer Dungeons (MUD), existed as early as 1978 or so.

In the past two years, the concept of the Metaverse has attracted the attention of those in the industry. The hype around the concept peaked when the company formerly known as Facebook changed its name to Meta and said it was moving in full to the Metaverse business. It’s unclear what exactly the Metaverse means by companies like Meta. Perhaps this vaguely defined concept is what attracts people. As author Ed Zitron recently pointed out, it is impossible to fail by drawing a vaguely grandiose blueprint for the future. But in various recent interviews and presentations, tech executives have floated a number of potential visions, none of which are very realistic.

The mainstream definition of the Metaverse is similar to the one in the book “Ready Player One”: a world in which users can wear virtual reality equipment and enter a digital paradise. Anyone can drive around in a sports car and visit Gandalf the wizard from The Lord of the Rings. Leaving aside management issues such as who manages, how to handle authorization, how to reduce harassment, and technical issues such as how to ensure the comfort of virtual reality gear, the primary question of the Metaverse is, does the general public really want something like this?

Of the 17,650 Twitter users who responded to the survey, 64.5% said no, and they wouldn’t use this style of Metaverse regularly. Fewer than 20% said they would.

Avid proponents of virtual reality devices also admit that short-term use of the experience works best. Virtual reality is more of a complement to the modern gaming experience than a replacement. To be sure, the technology will get better over time, but even if the device is light enough and comfortable enough to be used for extended periods of time, that need doesn’t seem to be there. Few people want to be tethered to a virtual world all day.

This also ties into another common use case for the Metaverse: everyone will be in virtual reality for all aspects of their daily lives, such as meetings, socializing, shopping, eating, exercising, and more. Meta CEO Mark Zuckerberg said he believes the future of work and gatherings will take place in the Metaverse, where users can look around in a virtual world and see digital representations of their colleagues.

It sounds like a nightmare, and no one wants to spend more time in digital meetings . Many people who work from home complain about how bad it is to be on the phone and have online meetings all day. Who other than tech executives like Zuckerberg would be excited about this prospect?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-metaverse-of-the-huge-loss-of-tens-of-billions-of-dollars-meta-is-a-bit-collapsed/
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