Mark Zuckerberg’s headache: More than a year of making a virtual universe, Meta still lives on advertising, Reality Labs “burns” nearly $ 14 billion without any results

Mark Zuckerberg’s dream of a bright future in the virtual super universe is costing investors too much, according to CNBC. The latest report shows that Reality Labs, a division that focuses on developing virtual reality technology projects for Meta, lost $4.28 billion in the fourth quarter, thereby bringing the total amount to “evaporated” in in 2022 to 13.72 billion USD.

According to experts, 2022 is a difficult year for Mark Zuckerberg. At the end of 2021, the CEO changed the company’s name and announced the move to the metaverse – a digital universe where people can comfortably work, shop, play and study. However, for now, Meta is still just an online advertising agency, while Reality Labs has become a “money burner”. According to CNBC, Reality Labs generated $727 million in the fourth quarter and $2.16 billion in revenue for all of 2022 — down from $2.27 billion in 2021.

Reality Labs is estimated to record a quarterly operating loss of $4.36 billion on revenue of $715.1 million, according to StreetAccount. Sales of VR headsets in the US fell 2% in 2022 through early December, according to data shared by research firm NPD Group.

In July, Meta announced that it would raise the price of the Quest 2 VR headset to $100 as a way to cool inflationary pressures. The higher-end Quest Pro VR headset was then released in October for $1,500. However, the poor business situation forced Meta to reduce the price of this product by $ 400 for a limited time.

Last summer, Zuckerberg hoped the virtual universe would “have about a billion users and they’ll be doing hundreds of dollars worth of virtual transactions” by the second half of the decade. However, before the Facebook founder’s dream becomes a reality, Meta will have to spend many more billions of dollars developing VR and augmented reality technologies.

According to CNN, demand for online advertising has fallen in recent months amid rising inflation, coupled with fears of a major recession. Tech companies like Google and Snap also recorded a decline in advertising revenue in the last quarter of the year.

Along with that, Meta’s user growth rate is also slowing down in the context of competitors like TikTok increasingly expanding. As of the end of the third quarter, Meta had 2.96 billion monthly active users on the Facebook app, up 2% year-over-year. This is down from the 6% growth Meta recorded in the same period last year.

In addition, the number of daily active users on Meta’s application line increased 4% to 2.93 billion, down from 11% growth in 2021. According to experts, operational challenges Meta’s core business is getting bigger and bigger, in the context of the billion-dollar company putting too much money into developing the virtual universe. Losses from the company’s “super-reverse” ambitions are expected to “increase significantly” in 2023, according to CNN.

It is known that Reality Labs lost nearly $3.7 billion in the third quarter. Revenue from this division also fell nearly 50% year-over-year. This is partly due to dismal sales of Quest 2 glasses, according to Chief Financial Officer David Wehner.

In response, Mark Zuckerberg said: ” While we face short-term revenue challenges, the fundamentals can still help improve revenue growth significantly .” According to CNN, this CEO in the coming time will focus on 3 main areas, including AI discovery tools that provide algorithms for Reels, advertising and visibility for the metaverse.

Most recently, higher-than-expected fourth-quarter revenue helped Meta stock surge more than 20% by the end of the session. Zuckerberg, who spent 2022 promising a metaverse digital future, has finally focused on solving the immediate problems, such as showing users the right videos and content on the homepage. . This CEO even called 2023 a “productive year”.

Meta stock is up 27% year-to-date after its worst year in history. This social media giant said it will streamline the operating system more effectively and decisively, along with the effective help of artificial intelligence AI.

“ We are ‘flattening’ the organizational structure, while removing some layers of middle management to become leaner, more efficient. We also deploy and apply AI tools to support the majority of engineers. There’s still a lot that can be done to improve Meta’s productivity, speed, and cost ,” Zuckerberg said.

By: CNBC, Bloomberg