Facebook owner Meta reported that its metaverse division Reality Labs posted a $3.7 billion loss in the third quarter of this year.
That brings Reality Labs’ year-to-date losses to a staggering $9.4 billion. Meta said that it does not “anticipate that Reality Labs operating losses” will grow significantly next year.
Meta said Reality Labs generated $285 million in revenue for the quarter, down from $558 million the previous year. The company's "Family of Apps" business segment, which includes Facebook and Instagram, registered $27.4 billion in revenue.
Outside Reality Labs, Meta continues to generate robust advertising revenues quarter after quarter with its core apps businesses, Facebook and Instagram. However, after topping $1 trillion dollars last year, Meta’s market capitalization has plummeted to below $350 million.
Storm clouds have been brewing all year as Meta appears to continue prioritizing its metaverse ambitions over its core businesses.
Most recently, Meta shareholder Altimeter Capital Management’s CEO suggested in a blog post that the company slash its workforce by at least 20% in addition to reducing investment, primarily by limiting Reality Labs’ expenditures to no more than $5 billion a year. Less than a month ago, Zuckerberg told employees Meta was freezing hiring and restructuring teams to cut costs.
During an earnings call with analysts, CEO Mark Zuckerberg said his metaverse strategy involves much more than the company’s efforts to develop its virtual reality business. Meta’s aspirations, he said, also include research and development initiatives geared towards developing augmented reality and neural interface technologies.
“Look, I get that a lot of people might disagree with this investment [in the metaverse], but from what I can tell, I think this is going to be a very important thing,” Zuckerberg said on the call. “I think it would be a mistake for us to not focus on any of these areas which I think are going to be fundamentally important to the future.”
For more than a year, Zuckerberg has been working diligently to sell his vision for Meta’s future and how it hinges on the company’s ability to build its version of the metaverse, an immersive digital space where people can work, play games and socialize.
Meta’s flagship virtual-reality platform is called Horizon Worlds. It has so far struggled to attract high numbers. Fewer than 200,000 people are visiting Horizons each month, according to a recent report in The Wall Street Journal.
Although the platform is only a little over a year old, the numbers seem paltry when compared to Facebook and Instagram, which between them boast about 4 billion users.
During the company presentation Meta Connect earlier this month, Zuckerberg doubled down on his mission to play a pivotal role in building a metaverse, a business concept that in many people’s minds will take years to fully form. The head of Meta unveiled a new, more advanced virtual reality headset he hopes will help lure more people into the metaverse.
Zuckerberg spent a large portion of Meta Connect exalting the virtues of using virtual reality for work. This included announcing strategic partnerships with Microsoft, Accenture and Zoom.
“There are 200 million people who get new PCs every year, mostly for work, and our goal for the Quest Pro line over the next several years is to enable more and more of these people to get their work done in virtual and mixed reality,” Zuckerberg said. Meta's new Quest Pro VR device will costs $1,499.
Despite many criticisms of Meta's strategy, analysts have predicted the metaverse will be worth trillions of dollars in the future.
Aside from disagreements over strategy, Meta's problems with regulators have not completely gone away. Recently the company found itself in the Federal Trade Commission's crosshairs. The agency in July filed a suit against Facebook, alleging the firm is trying to assume monopoly control of the metaverse.
Update: This story has been updated with comments from Meta CEO Mark Zuckerberg, speaking during the company's third-quarter earnings call and with market capitalization and additional revenue data.
© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.