- MAP Asia Pacific Ltd
Mark Zuckerberg’s metaverse of problems has culminated in Meta firing 11,000 people
It’s autumn in Silicon Valley. The leaves are falling off not just the trees but from Meta’s giant dreams.
The contrast in the stock price around its last two annual developer conferences, usually held in October, is testimony enough.
2021: Facebook renamed itself as Meta, in tune with its ambitions to dominate Metaverse. The company stock traded at USD316.92.
2022: The stock tumbled by 24%, and the company is now trading at USD97.74, the lowest since 2016, decimating its market cap by USD80 billion.
Mark Zuckerberg’s metaverse bet is trying to balance itself on wobbly legs. For those who didn’t get the reference, in this last one year, one of Meta’s biggest announcements has been the introduction of ‘legs’ for avatars — a work-in-progress feature that adds limbs to floating digital torsos.
So far, the company has spent USD10 billion to try and develop and, therefore, dictate what Zuckerberg calls the “holy grail” and the “future of the Internet” — the metaverse.
Is it failing?
It would appear so, since the company fired 11,000 people right after voting wrapped up in the US midterm elections. The failure of Meta’s metaverse bet and Wall Street’s reaction to that, is central to Meta going into restructuring mode.
We at ET Prime pored over the company’s financial documents, and spoke to industry analysts and market watchers to further our understanding into the question: What is Zuckerberg trying to do anyway? Did he bet too much too soon?
This is what we found out.
The promise of the future
There was no doubt in October 2021 that Zuckerberg was going all in. “We believe the metaverse will be the successor to the mobile Internet. We will be able to feel present — like we’re right there with people no matter how far apart we actually are,” he said, while announcing the rebranding of the company, originally called Facebook.
In fact, the rebranding was single-handedly responsible for hike in virtual real-estate prices and mushrooming of metaverse startups globally, including India. Zuckerberg had mentioned that India would play a key role in its metaverse journey.
Over the consecutive months and subsequent quarterly results, he continued to stand by his thesis: “Metaverse will be the holy grail of social experience”. This hasn’t changed even a wee bit, despite the company facing the third consecutive quarter of underperformance.
But beneath the gloss of the rebranding, the company already had a plethora of problems. On top of data-privacy issues, content moderation, antitrust litigations, and a push to revamp its advertising strategy across the group, there was now another, hugely complicated project — the metaverse.
It is clear why he had to do it.
Google and Apple had carved the mobile era between themselves and had become gatekeepers for data — the lifeblood of modern tech businesses. Facebook was relying on these two companies deeply to get rich data about users that it could then use to target better.
Apple’s privacy pivot, which reduced the amount of data third-party developers have access to, is the best example of why Zuckerberg had to change. Earlier this year, Facebook had said that just one change —Apple making third-party tracking of user behaviour across apps an opt-in feature — would impact Meta’s 2022 revenue to the tune of USD10 billion.
"Be it Oculus or Portal, Facebook is yet to find its way with product engineering and go-to-market. When it comes to its metaverse bet, Meta’s Reality Labs unit continues to bleed over the Horizon." — Prabhu Ram, head – industry intelligence group, Cybermedia Research
Zuckerberg has for long been aware of the risk that Meta suffered from — it was only a software platform and did not have a systemic play, unlike Google and Apple. Betting big on Metaverse — with him developing both hardware and an ecosystem of use cases and apps around it — would afford him far greater power.
He has till date invested USD15 billion into making the Metaverse happen, a sum that US based magazine Fast Company equates to the GDP of Jamaica.
Wall Street is not known for its patience.
Since Zuckerberg tied the company’s future to the metaverse, Meta’s stock has lost roughly half of its value on the back of macroeconomic conditions. With companies looking to cut down expenses, Meta’s ad-revenue and core business have taken a hit.
All of this was accentuated by Meta’s lack of headway in metaverse. Jake Dollarhide, CEO, Longbow Asset Management, who tracks Meta, says that Zuckerberg’s bet on the metaverse while its core business, advertising, is sinking, has made investors nervous and sceptical, with many selling their shares.
In addition, the large chunk of capital invested in a future metaverse business is at least five to 10 years away from producing returns, that too from what could eventually require as much as USD100 billion in investment — USD10 billion per year for 10 years. Clearly investors and Wall Street are not on board.
In an open letter dated October 24, 2022, Brad Gerstner from VC fund Altimeter, said that Meta’s “estimated USD 100 billion investment into the unknown future is super-sized and terrifying, even by Silicon Valley standards”.
In August, Zuckerberg posted an image of his avatar in front of the Eiffel Tower to announce the launch of Horizon World — a virtual-reality platform developed by Meta — in France and Spain. With deadpan eyes, the image barely passes for juvenile animation. Many had likened it to the animation in the 1990s and early 2000s in popular games like Second Life.
A few days later, announcing major upgrades to Horizon and avatar graphics, Zuckerberg in an Instagram post said, “I know the photo I shared earlier this week was pretty basic… The graphics in Horizon are capable of much more…”
But the episode is illustrative of just how early Meta has pledged its future to this technology. What makes it even more difficult is that the metaverse needs this software company to first innovate massively on hardware to develop usable and light gadgets like headgear to deliver the metaverse experience in the first place.
The current iteration of the Oculus device, which Meta is betting on to deliver the metaverse, is still chunky, and at USD1,500, priced steeply. While a sleeker and cheaper version of the VR headset might make a cut a few years down the line, are Wall Street and Facebook’s board willing to wait that long?
Read More at https://economictimes.indiatimes.com/prime/technology-and-startups/metas-metaverse-mistake-why-mark-zuckerbergs-big-strategic-bet-is-on-wobbly-legs/primearticleshow/95285418.cms