Meta (FB) CEO Mark Zuckerberg is betting the future of his 3.64-billion member social media empire on the metaverse. And so far, all he’s got to show for it is billions in expenses and a plummeting stock price. Shares of the company are off 38% over the last 12 months, while the S&P 500 is down 4.95%.
On Wednesday, Meta’s president of global affairs, Nick Clegg, published a lengthy blog post defending Meta’s heavy investments in the metaverse, outlining how he believes the technology will change the way consumers access the internet. According to Clegg, the transition will be similar to how we went from using large, clunky desktops to sleek smartphones.
The metaverse is expected to be a series of interconnected, persistent online worlds accessible via virtual reality and augmented reality headsets and apps.
“Skepticism is a natural reaction to something that sounds like it’s straight out of a science fiction novel — in a way, it is — especially when there are wider societal concerns about how tech operates in the two-dimensional world,” Glegg said.
In his post, the executive cited a Meta-financed research paper by Lau Christensen and Alex Robinson of the economic consulting firm Analysis Group that estimates the metaverse will contribute $3.01 trillion to the global economy by 2031.
Clegg also attempted to assuage concerns that Meta will try to dominate the metaverse by becoming the sole means for users to connect to the online world.
“Like today’s internet, the metaverse will be a constellation of technologies, platforms, and products,” Clegg explained. “It won’t be built, operated or governed by any one company or institution. It will take a range of companies large and small, civil society, the public sector, and millions of individual creators.”
Clegg also hypothesized that medical students could use the metaverse to train for surgery or attend lectures anywhere on Earth without needing to travel.
All of this comes as Meta’s core advertising business is feeling the continued impact of Apple (AAPL) iOS privacy changes, the war in Ukraine, and supply chain issues.
Apple’s App Tracking Transparency (ATT) has hurt Meta’s ability to help advertisers track the effectiveness of their campaigns on the company’s platforms, while the war and supply chain crisis have squeezed companies’ marketing spending. Not to mention increased competition from short-form video app TikTok.
All of that has meant two consecutive rough quarters for Meta, which missed revenue and earnings expectations and lost users in Q4 and fell short of analysts’ revenue predictions in Q1.
Meta has ramped up spending on its Reality Labs business, with the division costing Meta $10.2 billion throughout 2021, up from $6.6 billion in 2020 and $4.5 billion in 2019.
But the continued headwinds from Apple’s ATT and TikTok has forced Meta to cut back on spending, including for its Reality Labs arm. The company now says it will reduce fiscal 2022 spending from $90 billion to $95 billion down to $87 billion to $92 billion. It will also deprioritize some Reality Labs projects.
With so much increased scrutiny from investors, and a huge part of its business on the line, it’s clear why Clegg would post such a lengthy piece about why the metaverse matters and how it will unfold in the years to come for both Meta and the broader tech industry. Now the social media giant just has to deliver on its promises.
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