Facebook’s parent company is under pressure to focus less on the metaverse, as investors say it’s an experimental bet leading to “outsized and frightening losses.”
The tech giant changed its name to Meta last year with plans to build a virtual world that would be used by millions of people.
But Mark Zuckerberg’s metaverse has been plagued by technical issues, with user numbers well below the targets set by executives.
The latest figures show that Reality Labs, the division that builds the metaverse, lost £3.16 billion between July and September, compared with £2.27 billion in the same period a year earlier.
Investors rushed to dump Meta shares after the company warned that losses linked to the metaverse will “grow significantly” in the coming year.
Asked why his company is focusing on experimental betting, Zuckerberg said, “It would be a mistake for us not to focus on any of these areas that will be fundamentally important to our future.”
But analysts have said the metaverse “looks like a big bet” – especially given the current economic crisis – and fear the road ahead will be “long and painful”.
The VR headsets needed to get the best experience in Meta’s virtual world are expensive. One costs £1,300, putting it out of reach for many consumers.
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PP Foresight’s Paolo Pescatore said: “People aren’t rushing out of their seats to buy a VR headset or even watch 360-degree videos… The new device still looks like an expensive toy” .
Earlier this week, a fund that invests in Meta asked the company to reduce its annual investment in the metaverse from $10 billion to $5 billion.
Altimeter Capital CEO Brad Gerstner warned: “Meta has drifted into the land of excess: too many people, too many ideas, too little urgency.
“This lack of focus and fitness is obscured when growth is easy, but deadly when growth slows and technology changes.”
Meanwhile, Insider Intelligence analyst Debra Aho Williamson has warned that Meta needs to change its business, focusing less on the metaverse and more on fixing its core business.
“As Facebook Inc, it was a revolutionary company that changed the way people communicate and the way marketers interact with consumers. Today, it is no longer that groundbreaking innovator.”
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1:00 a.m. October 2021: Facebook rebrands as Meta
Meta, which owns Facebook, Instagram and WhatsApp, has other clouds on the horizon as it battles falling advertising sales and stiff competition from TikTok.
Third-quarter revenue fell for the second time in a row to £23.83bn.
Meta’s share price is in danger of falling to its lowest level in six years, and shares have plunged 61.6% since the start of the year.
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