Facebook is haemorrhaging money and value. The reason? The metaverse, who since Facebook changed its company name to Meta in October 2021 has been its long-term strategic goal. The fact is, while the metaverse has seemingly caught the attention of CEO Mark Zuckerberg in a very large way, so far it has done nothing but cost the social networking company masses of money.
From early 2019 to September 2022, Meta invested $36 billion in Reality Labs, its metaverse and VR division.
However, over the same period, Reality Labs posted an operating loss of $30.7 billion, while Meta’s share price fell from 378.69 in September 2021 to a low of 90.79 at the end of October, a 76% drop. This decline effectively wiped $700 billion off Meta’s value, with the company announcing in November that it would lose 11,000 jobs (or 13% of its global workforce).
Yet, despite these losses, Meta continues to continue with its bet on the metaverse, even in the face of continued skepticism. And while it may not have produced much in the way of tangible success for Meta, it has likely helped the cryptocurrency and blockchain industry, with Zuckerberg’s backing of the metaverse helping to increase visibility and adoption of decentralized versions of the metaverse.
Facebook’s Metaverse bets a year on: promises but no products
When Meta released its third-quarter earnings report at the end of October, a Wall Street analyst called it a “train wreck,” such was the extent of the financial damage it described. In fact, Meta reported a 52% drop in net profit between Q3 2022 and Q3 2021, as well as a 19% increase in costs and expenses.
There are a number of reasons for Meta’s one-year recession, from the same macroeconomic pressures that hurt the cryptocurrency market to growing competition from rival start-ups like Tik Tok and Snapchat. However, perhaps the most obvious cause is the company’s continued investment in the metaverse, which has yet to produce anything but a loss.
Its metaverse division, Reality Labs, lost $9.4 billion in 2022 alone, and Meta predicts that those losses will increase in 2023. In a statement released in October, “We expect Reality Labs’ operating losses in 2023 to grow significantly year-over-year.”
From this financial information alone, it’s pretty safe to infer that Meta has produced very little in terms of a viable metaverse-related product that people or companies actually want to use. However, to be fair, it has developed new VR headsets for the metaverse and various services, including a Meta Quest for Business service unveiled last October.
The idea behind this particular concept is a virtual collaborative space of companies and employees, a bit like a Microsoft Teams with virtual office spaces. In fact, Meta has even partnered with Microsoft for the product (yet to be released), meaning it will offer a VR experience for Teams, through which employees can communicate and even access Microsoft applications through the Meta Quest Pro headset.
Meta
also partnered with professional services firm Accenture, which has been testing the social media company’s VR offerings and will work alongside Meta and Microsoft to encourage other companies to delve deeper into the metaverse. But while Meta is starting to have real VR products that companies could use for virtual conferencing and work, observers have argued that these remain quite primitive at the present time, insofar as they offer no tangible improvement over existing telecommuting and conferencing tools.
As for individual consumers, Meta has actually released VR headsets since it acquired Oculus in 2014. It released Oculus Quest 2 (now known as Meta Quest 2) in October 2020, for example, making a number of VR-based games available to regular audience members, as well as a variety of social apps.
However, the
extent to which people are actually buying the Meta Quest 2 headset is unclear, with reliable sales figures only available through November 2021, showing that around 10 million units of the headset had been sold until then. Compared to the two billion users reported by Facebook, this is a mere drop in the ocean, while sales of VR headsets in general declined worldwide in 2022, indicating that things have slowed down more recently.
Meta has revealed that its Meta Quest store (through which users can purchase apps for its VR headset) has reached $1.5 billion in total revenue to date, so it’s at least doing something with VR. But then again, $1.5 billion isn’t much for such a large company, while it’s also entirely questionable whether that revenue represents interest simply for VR entertainment rather than the metaverse, which is a much more ambitious and all-encompassing concept where people apparently “live” and “work” in VR.
Crypto Piggybacking on Meta’s Efforts
However, Meta is undoubtedly moving forward with its bet on the metaverse, for better or worse. It has new products planned, including Meta Horizon Worlds (which will allow people to phone friends who are playing VR), as well as a new consumer-centric headset planned for this year. And while it’s hard to say whether it will ever really profit from its bet on the metaverse, there’s no doubt that it has benefited from encryption in various ways.
When it announced its name change to Meta, it caused a big rally among the cryptocurrencies of platforms related to the metaverse, such as Decentraland, Sandbox and Axie Infinity (among others). Obviously this rally has faded in the wake of the 2022 bear market, but the fact remains that such platforms have much more visibility and traction than before Facebook made its bet on the metaverse.
For example, the Sandbox has celebrated partnerships with a wide range of big names following Facebook’s change, with the likes of Warner Music Group, HSBC and Forbes establishing presences in its virtual world. Much the same goes for Decentraland, which has also seen ties to Netflix, Samsung, La Liga, Hershey’s and Skechers.
The point here is that, by making the metaverse its long-term goal, Facebook/Meta has forced a very, very large number of other companies and brands to examine how they might leverage this new area. As exemplified above, they then reached out to existing metaverse platforms, increasing the size and reach of the latter in the process.
Many companies have also tried to tap into the burgeoning area of the metaverse and Web3 in their own particular ways. Perhaps the most notable example of this is in the fashion industry, which has seen almost every major fashion house and brand delve into non-fungible tokens and beyond in the last 12 months or so. This includes names like Nike, Balenciaga, Jimmy Choo, Dolce & Gabbana, Gucci, Louis, Nike, adidas, Prada, Balenciaga, Tommy Hilfiger and Ralph Lauren, many of whom have used existing platforms to leverage NFT and other elements of the metaverse.
Ethereum has probably been the biggest beneficiary of this influx, as it hosts the vast majority of crypto NFTs. A dashboard from Dune Analytics actually shows that branded NFTs hosted on Ethereum have generated hundreds of millions of dollars in revenue for their respective business owners, meaning they’re already no small matter.
It is highly questionable that such volumes would never have been achieved if it weren’t for Facebook, which by becoming Meta has made the metaverse a battleground for companies that want to dominate the future. And regardless of which companies end up dominating the metaverse, it’s already clear that crypto will be the main winner.
