Reporter of Meijing: Wen Qiao Editor of Meijing: Gao Han
On October 26, local time, Meta (META, stock price of US$129.82, market value of US$348.898 billion) announced its third quarter financial report for the 2022 fiscal year. In addition to the decline in advertising business, which accounts for the majority of revenue, it is worth noting that Reality Labs, a core project of the metaverse that Meta has high hopes for, has still stagnated and its losses are increasing day by day. The decline in
also made Wall Street sound that he was not optimistic about the metaverse. Brent Thills, managing director of Jefferies , said it was not the metaverse itself that keeps investors on their alert, but the scale of Meta's investment in it, which looks "too aggressive from the top" and "will greatly affect its core business, namely advertising."
Although the metaverse business is losing money, Zuckerberg has sent a message to all metaverse critics-he doesn't care about the outside world's ideas.
In the performance outlook, Meta expects Reality Labs' operating losses to "grow significantly year-on-year" in 2023, but the company also stated that it will continue to accelerate investment in this business after 2023 so as to achieve the goal of increasing the overall operating profit of the branch from the long term.
Reality Labs has suffered continuous losses and there are constant doubts from the outside world. Under "internal and external troubles", is it possible for Zuckerberg's meta-universe to be realized?
Zuckerberg "fights to the death" Meta Universe
After the announcement of its performance that was less than expected, Meta fell nearly 20% after the market closed on Wednesday. As of press time, the company's stock price fell more than 20% before the market trading on Thursday.
Image source: Google Finance
According to Meta's third-quarter financial report for fiscal year 2022 released by Meta, Meta's meta-universe core project Reality Labs revenue in the third quarter was US$285 million, a year-on-year decrease of 49%, and the market expects US$400 million. The operating loss was US$3.67 billion, compared with a loss of US$2.63 billion in the same period last year, and an expected loss of US$3.09 billion. It is worth noting that Reality Labs has lost $9.4 billion in the first three quarters of this year, and lost more than $10 billion last year.
In addition, according to the " Wall Street Journal " report on the 18th, multiple internal documents from Meta show that its meta-universe flagship product, Horizon Worlds, failed to meet internal expectations. Meta's initial goal is that Horizon Worlds can achieve 500,000 monthly active users by the end of 2022, but the current number is less than 200,000. Most people stayed at Horizon Worlds for a month before not returning to the platform, and the number of users has been steadily declining since the spring.
It is also reported that the $1,500 Quest Pro virtual reality headset launched by Meta in early October did not gain much "spark" due to its excessive cost and limited use. Brad Gerstner, chairman and CEO of Altimeter Capital, one of the shareholders of
Meta, is increasingly dissatisfied with Meta's strategy of betting on Meta. In an open letter, he asked Zuckerberg to lead Meta to "regain shareholder trust and retain technical talents." In addition to demanding a 20% cost cut, he also hopes to cut investment in Meta to half of $5 billion per year.
Gerstner accused Meta of distracting its focus on the core business that generates profits . Meta's third-quarter financial report data showed that advertising business, which accounts for most of its revenue, suffered a decline in the third quarter. Meta's advertising revenue in the third quarter was US$27.24 billion, a year-on-year decline of 3.7%, and the business accounted for more than 98% of the company's total revenue.
However, although the Meta Universe business is constantly losing money, and in its performance outlook, Meta expects Reality Labs' operating losses to "grow significantly year-on-year" in 2023, Meta said that it will continue to accelerate investment in this business after 2023 so as to achieve the goal of increasing the overall operating profit of the branch in the long term.
This will lead to an increase in the overall cost of Meta. Meta expects the company's total spending for the full year of 2023 will be between $96 billion and $101 billion, up from $85 billion to $87 billion in 2022. During the earnings call, Zuckerberg defended the vigorous investment in developing the metaverse and AI, saying, “We are obviously doing some leading work that will lay the groundwork for the next major computing platform.”
According to foreign media The Information, in addition to investment in the metaverse, the increase in expenditure is also partly due to the expenditure of artificial intelligence , including the short video Reels business that tries to compete with TikTok, and advertising and commercial messaging technology. After
delivered lower-than-expected results for several consecutive quarters, personnel changes are even worse for Meta. David, who served as Meta's chief financial officer for the past eight years, who served as Meta's chief operating officer Sheryl Sandberg, who had been serving as Meta for 14 years a few weeks ago, resigned. Wehner will leave in November.
Industry: The meta-universe is "bottomless spending" and lacks decentralized elements
Gerstner's open letter is a microcosm of the growing number of investors and analysts' doubts about the Meta prospects. The company's share price has fallen by nearly 60% since the company announced last year that it changed its name from Facebook to Meta.
Before the release of Meta's third quarter report, Bank of America lowered the Meta rating from "buy" to "neutral", believing that the reduction in advertisers' budget in early 2023 will suppress market sentiment, and "in the recession scenario, there are generally some downside risks."
Some foreign media commented that Zuckerberg's "disconnection from reality" is a risk for shareholders and investors, pointing out that Meta is directly concerned about Reality Labs' investment is a kind of "bottomless pit expenditure". In the past year, Reality Labs has consumed more than $13 billion in shareholder capital, but has developed only a service with an annual revenue of only $2.5 billion.
According to the aforementioned analysis, since 2020, Reality Labs' operating losses have grown over time, and revenue has stagnated for years. Over the past five years, the gap between Meta's gross profit and net income and capital expenditure and margins has been widening. "This is also the reason why banking institutions and smart investors continue to exit Meta. "The article reads.
" Wall Street maintains a certain degree of skepticism about the scale of investment (Meta's) investment. "Investors are absolutely 100% opposed to this because of the lack of returns in the short term, coupled with concerns about the recession and a decline in advertising revenue." '
According to Forbes , there is another question about what exactly can Meta's meta-universe flagship product Horizon Worlds bring. Although Zuckerberg has emphasized that the future of the project is "open" and "interoperable", the technology used by Meta is traditional and lacks decentralized elements such as blockchain or other distributed ledger technology libraries that can distinguish it from so-called walled gardens (closed platform) social media. At present, the meta-universe is often seen as an immersive version of the Internet with virtual and augmented reality components. Cathy Hackl, founder of Journey Me-universe Studios, a web design consulting firm, web design consultancy Journey "Based on the standards you are now adopting, you may still have an open meta-universe, but without blockchain, you cannot have a decentralized meta-universe with truly interoperable. ”
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