Expensive metaverse: meta needs to be backed up

Image: Meta

The global economy is suffering from the consequences of the pandemic and the Ukrainian crisis. The advertising market is particularly feeling the effects – and with it Meta.

Since September 2021, Meta’s share price has lost about a third of its value. Revenue growth has been below analysts’ expectations for the past two quarters, user growth has been weak and a controversial metric, as Meta does not provide accurate data on things like bot and web activity. fake accounts.

The biggest kingpin in Silicon Valley history needs a few more years

At the same time, Meta has been investing billions of dollars in VR and AR technology for years. An investment that hasn’t paid off so far and won’t for the foreseeable future: Meta boss Mark Zuckerberg recently prepared investors for the fact that Metaverse sales won’t show their full potential than in the 2030s.

At the second quarter sales numbers investor conference, the Meta boss said investment in the Metaverse business in particular could be throttled given the current growth in the business and that financial targets in the short term could take priority.

With this last point, Zuckerberg will likely mean further growth in the core advertising business with Facebook, Instagram and WhatsApp cross-funding Metaverse development. “I know it’s expensive, that [Metaverse] to build,” Zuckerberg said on the call.

Meta invested $3 billion in XR development at Reality Labs in the last quarter alone. These expenses are offset by sales of approximately US$700 million.

Meta must rethink its priorities and hire less

A leaked internal memo from Meta CFO David Wehner confirms Zuckerberg’s testimony. In light of recent business results, Wehner speaks of the need for “focused and balanced investments” that support the most important strategic priorities.

Wehner cites Apple’s iOS advertising restrictions, the Ukraine crisis, the generally difficult macroeconomic environment and rapid short-term growth during the pandemic years as reasons for the recent slowdown in sales growth.

As a first concrete step, Wehner announces less settings than originally planned to. This decision would affect “pretty much every team”. Wehner doesn’t give exact numbers, but does mention that Meta hired as many engineers in the first quarter of 2022 alone as in 2021 in total.

Wehner also addresses internal restructuring to bolster projects to prioritize this year. as a possible future growth drivers Wehner calls reel monetization on Instagram, AI in the ad system to overcome the downsides of iOS, enterprise messaging, and “realizing the metaverse.”

Meta must now act responsibly as “unpredictable market forces” have put pressure on its core business in recent months.

“We need to re-evaluate our priorities and make tough decisions on what projects to undertake in the short to medium term to achieve the cost reductions we promised at the investor conference,” Wehner wrote.

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