Even by Facebook’s standards, 2021 has been a tough year.
A series of damning reports based on whistleblower leaks have raised uncomfortable questions about Facebook’s impact on society; the company continued to be rocked by concerns about its platform being used to stage the Jan. 6 Capitol Riot; and Apple’s privacy changes threatened its core advertising business. Meanwhile, younger users were flocking to TikTok.
During a virtual reality event on October 28, 2021, CEO Mark Zuckerberg attempted to move on. Zuckerberg announced that Facebook would change its name to Meta and do all it could to create a future version of the internet called the “metaverse”, proving to everyone that the company he started in 2004 was more than just a social media company.
A year and billions of dollars later, the so-called metaverse still feels years away, if ever manifesting at all. And the company formerly known as Facebook remains a social media company – one that faces more financial pressure than when it announced the change.
Meta’s Quest 2 consumer virtual reality headset, released two years ago, is popular in its category but overall still a niche product. Its newest headset, the much more expensive $1,500 Quest Pro, is aimed at enterprise customers and likely won’t shake things up with everyday consumers. And Meta’s flagship social VR app, Horizon Worlds, may look like a ghost town (albeit a ghost town with a laser tag).
While some brands have since made measured bets on the Metaverse, including hiring “Metaverse leaders,” it’s unclear if consumers actually want to work or play it, or even know what it means. term difficult to define. The metaverse generally refers to a kind of virtual world that people can walk around in, as well as the idea of making the internet more ubiquitous and interconnected.
Meanwhile, Meta’s core business is shrinking as it faces growing competition from TikTok and a shrinking advertising industry amid fears of a looming recession. The company reported its second quarterly decline in revenue this week and saw its profits cut in half from a year earlier. It sells more ads but makes less money, and user growth on its social media platforms is slowing. After hitting a market capitalization of $1 trillion for the first time last summer, it is now worth around a quarter of that, less than Home Depot.
“The business is not growing in 2022,” said Gil Luria, technology strategist at DA Davidson. “It is expected to grow in the future, but that expectation may turn out to be optimistic.”
A gamble that seemed bold a year ago now seems borderline madness. Meta lost $9.4 billion in the first nine months of 2022 on its metaverse efforts and expects the unit’s losses to “increase significantly year over year” in 2023. This has even prompted some of Meta’s supporters to urge him to rethink his change in strategy. , and maybe slow it down. (It also prompted a tearful “Mad Money” host Jim Cramer to apologize to viewers for trusting Meta’s management team and recommending investors buy the stock.)
“People are confused by what the metaverse even means. If the company invested $1-2 billion a year in this project, that confusion might not even be a problem. You’d just be doing R&D quietly and investors would focus on the core business,” Brad Gerstner, CEO of Meta shareholder Altimeter Capital, wrote in an open letter to Zuckerberg this week. He urged Meta to “cap its investments in the Metaverse to no more $5 billion a year with more discrete goals and measures of success.”
The current pace of spending, he added, “is inflated and terrifying, even by Silicon Valley standards.”
Meta did not respond to requests for comment on this story.
Although the name change was only announced a year ago, Facebook’s move to Meta took years. Zuckerberg has said in the past that this is a long-term bet for the company, not an overnight transformation. It all started with Facebook’s purchase of Oculus VR in 2014, and in the years since, the company has rolled out a series of increasingly capable, affordable and wearable headsets.
Meta’s latest headset, the Quest Pro, is its first effort to combine virtual reality immersion with the real world. It can display text and fine detail in VR, track your eyes and facial features to give you a sense of connection with other people in virtual spaces, and show you a view of the world around you in color while allowing you to interact with digital objects — all nods to Meta’s goal of attracting more business users.
That’s a far cry from the Oculus Rift headset available in 2016: It cost $599, but users also had to hook it up to a powerful PC and use it with a sensor camera on a stand that followed the headset. At first, this headset didn’t even come with tracked hand controllers; it first shipped to customers with an Xbox controller and a small handheld remote.
Although headsets have improved dramatically, virtual reality and augmented reality are still nascent technologies in search of purpose and popularity. The VR headset market is still tiny compared to, say, an established gadget market like console video games. ABI Research expects 11.1 million VR headsets to ship this year, of which around 70% will be Quest 2 headsets. This is down from its estimate of 14.5 million headsets in 2021, of which Quest 2 headsets accounted for 85% of the total.
Some tech experts say these products have potential, including in the workplace, but in the short term, their adoption by everyday users remains uncertain at best.
“I’m not sure this will translate to end users any time soon,” said David Lindlbauer, an assistant professor at Carnegie Mellon University who leads the school’s augmented perception lab. (Meta sponsors Lindlbauer’s research into developing advanced user interfaces for augmented reality and virtual reality.)
For Zuckerberg and Meta, this creates a unique challenge.
Zuckerberg successfully pivoted Facebook’s once-before operations from desktop to mobile shortly after taking the company public, a move that helped boost its advertising business and secure its dominance for much of the past. next decade. But smartphones were already ubiquitous at that time; if anything Facebook was a little late.
Now the company is trying to launch new technology and hopes consumers will follow suit.
Meta positioned change as a sort of existential imperative for the business. After Apple’s app tracking changes hurt Meta’s ability to target ads to its users, the company doesn’t want to rely on outside hardware or an app store in the future.
But there’s a big difference between looking at a computer or smartphone screen and wearing a headset. While Lindlbauer can imagine using a headset for perhaps an hour a day, alternating between immersive virtual reality views and digital images that blend into the physical world, “I think we haven’t yet reached the sweet spot of something I want to wear all day. ,” he said.
Meta also faces a huge challenge when it comes to showing VR content that users like the look of and want to use repeatedly. According to a recent Wall Street Journal report, internal documents show Horizon Worlds has less than 200,000 monthly active users, a rounding error for a company with 3.7 billion monthly active users across its various services. (A spokesperson for Meta told the Journal that it’s “easy to be cynical about the Metaverse” but Meta thinks it’s “the future of computing.”)
“They’re starting with this idea that they want to build a big space like Horizon Worlds where everyone is just going to show up and start building stuff,” said Avi Bar-Zeev, founder of AR and VR consultancy RealityPrime. and former employee. at Apple, Amazon and Microsoft, where he worked on the HoloLens VR headset. “No virtual world has ever managed to create a canvas that people just come in and start painting.”
Zuckerberg personally received intense criticism for how Meta views work and play interactions in virtual spaces after posting an image of his cartoon-like avatar in Horizon Worlds on Facebook – an image he has later admitted to being “pretty basic”.
“When it comes to fast-twitch audiences, give me more, the progress we’ve seen so far is disappointing,” said Janna Anderson, director of Elon University’s Imagining the Internet Center. “Meta suffers tremendous ridicule on social media and in the minds of the general public.”
Quest Pro’s face tracking capabilities can help make avatars’ facial expressions more realistic: Initially, users can access this tracking in Horizon Worlds and Horizon Workrooms, Meta said, as well as several developer apps such as Painting VR and DJ app. XR Tribe.
But even with face tracking, what users see when they enter Horizon Worlds – blocky, human-like avatars that exist only torso-up, floating around a virtual plaza – will continue for the rest of the world. This moment stands in stark contrast to the image Zuckerberg painted during Meta’s Connect event on October 11 of his own full avatar.
In the meantime, investors seem fed up with investing in the Metaverse at a time when the future of its core business is also deeply uncertain.
“I think to sum up what investors are feeling right now is that there are just too many experimental bets compared to proven core bets,” Jeffries analyst Brent Thill said during Meta’s earnings call this week.
Zuckerberg, for his part, defends the change in strategy. “I would say there’s a difference between something that’s experimental and not knowing how good it’s going to end up being,” he replied. Separately, he added: “I think people will look back decades and talk about the importance of the work that has been done here.”