Meta’s Zuckerberg Remains Optimistic About the Metaverse Bet Despite Declining Revenue – The parent company of Facebook reported its second-ever quarterly revenue decline on Wednesday and said it expects to lose even more money on its efforts to build immersive digital realms known as the metaverse next year. Meta Platforms reported revenue of $27.7 billion for the third quarter of 2022, which is over 4 percent less than the $29.01 billion it reported for the same period in 2021. In its ten years as a publicly traded company, Meta reported its first quarterly revenue decline in the most recent quarter.
Meta also cautioned that its operating losses for Reality Labs, the division responsible for its virtual- and augmented-reality-powered services, are expected to increase significantly next year. On a slightly more optimistic note, the company reported that user growth on Facebook and its other apps increased when compared to the same quarter of the previous year. Meta’s mixed financial results occur at a time when the social media behemoth faces a long list of macroeconomic threats to its core business model.
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Newer competitors such as TikTok and Snapchat are increasing competition for advertising dollars and users in the social media market. And the targeted advertising methods which turned Meta into an economic behemoth took a hit last year when Apple introduced new privacy restrictions that required appmakers to explicitly ask users if they could track their activity across the internet — a request that many users declined.
Mark Zuckerberg, CEO of Meta, stated on a conference call with investors on Wednesday that the company will be able to overcome some of these challenges with its new product investments, including its decision to imitate the artificial intelligence-driven strategy that has made TikTok so popular by displaying entertaining content from strangers over posts from friends and family. Additionally, the company is heavily promoting its short-form video product Reels on Instagram and Facebook, in addition to new advertising options for businesses in private messages.
Zuckerberg stated that Reels are played 140 billion times per day on Facebook and Instagram, a 50 percent increase from six months ago. He added that the company anticipates being able to compete with TikTok by providing users with content from their social networks and a constant stream of viral content from creators. Zuckerberg stated, “We can mix this content alongside posts from your family and friends, which can’t be generated by AI alone.”
Zuckerberg acknowledged that by emphasizing Reels to users, the company was taking a revenue hit because making money from the short-form video product is still more difficult than with other products. Zuckerberg also highlighted the company’s investment in a product that enables businesses to run ads on Facebook and Instagram that, when clicked, initiate a conversation with the customer via direct message. According to the company, this service is projected to generate $9 billion in annual revenue.
Silicon Valley titans have been forced to manage their resources in a volatile economic climate after years of soaring profits and seemingly endless success. According to a memo posted to the company’s internal message board, Meta executives recently implemented a hiring freeze and informed employees that the company would stop making new offers to job candidates, sourcing candidates, and approving internal transfers.
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Meanwhile, Meta is investing billions in the creation of immersive virtual worlds referred to as the metaverse and accessible through virtual and augmented reality. The leaders at Meta, formerly known as Facebook, believe that people will want to work, play, and shop in these digital realms. The company unveiled a new high-end virtual reality-powered headset earlier this month for nearly $1,500.
