Remember the virtual world? Mark Zuckerberg has been promoting this new thing for years, even saying at this year’s Meta Connect that it would be the next frontier in social interaction. “Soon, I think we’ll get to a point where you’ll be live with some of your friends, and other people will appear as digital avatars or holograms, and they’ll feel like they’re there with other people,” he said at the company’s annual showcase event in September. But so far it has lost a lot of money.
The process of making Metaverse a reality was not without its growing pains, to say the least. Meta revealed in its latest earnings report that the company’s Reality Labs unit, which is responsible for foraying into the virtual world, has lost about $46.5 billion since 2019.
The losses during that time were enough to become a Fortune 100 company. The $46.5 billion figure exceeds Best Buy’s total revenue, which ranks the company at No. 94 on the Fortune 100. Meta lost more from its investment in Metaverse than the combined revenue of major companies such as pharmaceutical giant Bristol-Myers Squibb and United Airlines.
However, this has not hurt Mark Zuckerberg’s net worth. His net worth has soared 130% year to date as the majority of his wealth is tied to Meta stock, which has gained 136.8% this year.Since the beginning of this year, his net worth has increased by $59 billion to $105 billionmaking him the tenth richest man in the world.
Spending Billions of Dollars Pursuing “The Future of Online Interaction”
Despite the heavy losses so far, Zuckerberg doesn’t seem to be reducing his investment in the virtual world. “One of the most interesting questions for our industry over the next few decades is how we bring the physical and digital worlds together into a coherent and good experience,” he said on Meta’s third-quarter earnings call.
However, negative operating income doesn’t necessarily seem to catch Mehta or Zuckerberg off guard. The company has repeatedly said the goal of the unit is to develop long-term innovations that can then be integrated into other, more ubiquitous products such as Facebook, Instagram and WhatsApp, which it calls “family of apps.” “Reality Labs is working hard to build the future of online interaction,” Meta Chief Financial Officer Susan Li said on an earnings call this week.
While the Reality Labs unit has been unprofitable, Meta’s overall business has remained profitable. As of the third quarter of this year, the company had revenue of $95 billion and profits of $30 billion. Nearly all of Meta’s revenue (99%) comes from the company’s family of apps. Meta beat analysts’ expectations across the board on its latest earnings call, beating expectations on revenue, earnings per share, and daily and monthly active users.
Meta’s stock price fell 6.3% in after-hours trading after Wednesday’s earnings report, from $308.15 to $288.64 per share, and has fallen about 4.6% since Monday.but analyst This is mainly due to Uncertainty about online ad spending for the rest of the year due to escalating conflicts in the Middle East.
Reality Labs Expect More Losses
Li also told investors on the conference call that Meta expects Reality Labs’ operating losses to be higher at the end of this year than in 2022. Those losses are largely driven by what she calls “direct costs,” which are attributable to the production of specific products, stemming from the number of employees, operating expenses, and raw materials and labor required to make the unit’s VR headsets.
This year, Meta released two new products from Reality Labs: the new VR headset Quest 3; and Ray-Ban brand smart glasses. (Meta doesn’t break out sales figures for its Quest 3 headsets.) For now, at least, the company seems convinced that the two headsets will play a big role in the future of its social media apps. “As the glasses scale, they will make it increasingly easier to capture compelling content from a first-person perspective while you are immersed in the moment or ongoing activity, and sharing that content should enrich our content The ecosystem goes even further,” Li said.
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