Disclaimer: Opinions expressed below belong solely to the author.
Facebook’s parent, Meta Platforms, sank a whopping 24.6 per cent yesterday on missed targets, second quarterly decline in revenue and a huge 52 per cent drop in profit as Mark Zuckerberg burns through billions of dollars on his delusional metaverse fantasy.
Reality Labs — Meta’s arm dedicated to VR/AR technology that is supposed to power the metaverse — lost a combined US$9.4 billion in the past three quarters of this year alone and have yet to show anything for the money spent.
So far, the only thing Meta’s hardware is good at is, what it was originally designed by Oculus — i.e. occasional virtual reality use, mainly for gaming.
There is, undoubtedly, some money to be made there but it remains a niche; a mere gadget extending the capabilities of your PC at home, not a groundbreaking tool billions of people are going to use to socialise with each other, like in the visions peddled by Mark Zuckerberg over the past year.
Investors are similarly unconvinced, particularly as the business has burned way over US$10 billion in the past two years and has yet to present anything even remotely attractive to anybody.
Users are leaving already…
Silicon Valley’s mantra, “if you are not embarrassed by the first version of your product, you’ve launched too late” touted by Reid Hoffman, would seemingly provide some defense for Zuckerberg, but I’ve never bought into this view myself.
I’m firmly in the old camp of “you only have one chance to make a great first impression” — and in that regard, Meta has been a monumental disaster.
Initial buzz around the metaverse after Facebook’s rebranding drove 300,000 people to play Horizon Worlds as of February 2022, but that figure has now collapsed to under 200,000 just eight months later.
This is nothing short of a catastrophe as the original goal was to have at least 500,000 monthly active users by the end of 2022 — a target missed by well over 60 per cent. Even the revised figure of 280,000 appears to be out of reach as HW remains hampered by bugs, instability and not that much to do, as you’re sitting on a sofa with a plastic helmet over your head.
…but Zuckerberg stays put
Despite one failure after another, Meta CEO remains defiant and reiterated his belief in the grand vision of the virtual universe that we will somehow all use on a daily basis 10 years from now.
Look, I get that a lot of people might disagree with this investment, but from what I can tell, I think this is going to be a very important thing. People will look back a decade from now and talk about the importance of the work being done here.
– Mark Zuckerberg
To be fair to him, he did say that his expectation is that it may take until 2030s before metaverse takes its final shape.
That said, given Meta’s current catastrophic burn rate, it’s not certain if it can continue to bankroll the ridiculous investment for such a long time, particularly in the absence of excitement anywhere (including among the company’s “metamates”, as its employees are reportedly now called).
Investors certainly do not share Mark’s sentiments and I think you’d be hard-pressed to find anybody in the world who would be bullish not only on Meta, but on its ideas for social media of the future as well (recently panned by Snap’s CEO, Evan Spiegel as well).
It is true that innovation often experiences painful birth, which may take longer than initially anticipated, but it typically is able to capture public imagination, even if it requires further refinements.
Few people remember this, but the now-legendary launch of the original Macintosh by Steve Jobs in 1984 created enough buzz to carry the new computer only for a few months, before excitement turned into disappointment and sales collapsed.
Macintosh suffered from lack of memory and storage, and came at an unjustifiably high price. Subsequent tensions within the company led to Jobs’ ouster just a year later, even though that memorable 1984 moment has since entered the annals of tech history.
It did so not because of immense success of the product, but rather because what Macintosh promised, with its audiovisual advances, its graphical user interface, its compact built packing everything into one neat box, was so far ahead of everybody else.
Jobs stumbled and spent 12 years outside of Apple, but his vision was correct and general public was just as excited about it as he was. It just had to wait for the right moment.
None of that can be said about the metaverse.
Zuckerberg is losing sight of the company’s bottomline, as it is bleeding users and failing to onboard new ones, while younger audiences are lost to other platforms.
Facebook itself can’t deal with a plethora of problems and yet, the management is bent on building something completely new that nobody really wants, instead of fixing what it already has.
The results are hardly surprising. Meta has not only lost a quarter of its value in a day, but three-quarters since the peak in September of last year (moving six years back in time, since the last time it traded below US$100 was in early 2016):
While some tech companies like Sea or Grab have lost even more, with the money leaving the stock market, the difference is that they are high-risk, growth stocks while Meta was considered to be among the stable Silicon Valley giants, which are trading today only 20 to 35 per cent below record highs.
It means that Meta has effectively been relegated back to the startup league — a risky company whose future has been bet on an uncertain technology that few understand and nobody wants.
Unlike Jobs, Zuck can’t be forced out as he still controls the majority of voting rights. But, also unlike Jobs, he seems to be the only one who wants the metaverse at all.
He’s like a drunk behind the wheel, firmly convinced of his driving skills. Sadly, there’s nobody around to apply the brakes and take the keys out before he gets himself into a horrible crash.
