Mark Zuckerberg’s metaverse pivot is off to slow start. The company now known as Meta lost just over $10 billion on its Reality Labs division in 2021, according to its fourth-quarter earnings report.
“This fully realized vision is still a ways off,” Zuckerberg said of Meta’s metaverse investments. “And although the direction is clear, our path ahead is not yet perfectly defined.” Zuckerberg said the company planned to launch a new “high-end” VR headset as well as a mobile version of its horizon VR experience.
It’s the first time the company has shared the financial performance of the AR and VR division that’s central to its metaverse ambitions (Facebook acquired Oculus in 2014). That the metaverse isn’t yet turning a profit isn’t a surprise. The company said last quarter that its AR and VR investments would result in a $10 billion loss. But combined with flat user growth and continued hits to its advertising business, the company’s fourth-quarter results sent Meta’s stock into a nosedive wednesday
Meta
Among the concerns: Facebook’s daily active users (DAUs) declined from 1.93 billion last quarter to 1.29 billion, a change that Zuckerberg attributed in part to increased competition from TikTok. “We’re in the middle of a transition on our own services towards short form video like Reels,” Zuckerberg said. “Reels is now our fastest growing content format by far.” But he added that Reels doesn’t monetize yet as well as Stories or feeds. The Facebook founder said last quarter that attracting “young adults” between the ages of 18 and 29 would be one of its top priorities, as Facebook reorients its platform around short form video to better compete with TikTok. But while Reels is showing strong growth, Facebook’s overall users growth suggests the feature isn’t yet attracting the new users Zuckerberg wants to reach.
Facebook’s revenue growth is also expected to slow in the coming months. Though its ad business is still incredibly profitable — it made $32.6 billion in the last quarter — the company warned that Apple’s iOS 14 privacy changes will have a significant impact in the next quarter. “The accuracy of our ads targeting decreased which increased the cost of driving outcomes,” COO Sheryl Sandberg said on the call. Zuckerberg said improving the company’s ads despite Apple’s changes was one of Facebook’s top priorities, and that it was “rebuilding a lot of our ads infrastructure.”
Until then, though, Apple’s ad targeting changes could be as money-sucking as its metaverse investments. “We believe the impact of iOS overall as a headwind on our business in 2022 is on the order of $10 billion,” CFO Dave Wehner said. “So it’s a pretty significant headwind for our business.”
All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.
