Even by Facebook’s standards, 2021 has been a rough year.
A series of damning reports based on whistleblower leaks have raised uncomfortable questions about Facebook’s impact on society; the company continued to be rocked by concerns that its platform was being used to stage the January 6 Capitol riot; and Apple’s privacy changes threatened their core advertising business. Meanwhile, younger users flocked to TikTok.
During a virtual reality event on October 28, 2021, CEO Mark Zuckerberg tried to move forward. Zuckerberg announced that Facebook would change its name to Meta and do everything it could to create a future version of the Internet called the “metaverse,” proving to everyone that the company he started in 2004 was more than just a social media company.
A year and billions of dollars later, the so-called metaverse still feels years away, if it manifests at all. And the company formerly known as Facebook remains a social media company — one that faces more financial pressure than when it announced the change.
Released two years ago, Meta’s Quest 2 consumer virtual reality headset is popular in its category, but generally still a niche product. Its newest headset, the much more expensive $1,500 Quest Pro, is aimed at business customers and likely won’t shake things up with everyday consumers. And Meta’s flagship social VR app, Horizon Worlds, can look like a ghost town (albeit a ghost town with a laser tag).
While some brands have since made measured bets on the Metaverse, including hiring “Metaverse executives,” it’s unclear whether consumers actually want to work or play it, or even know what that means. The term is difficult to define. The metaverse generally refers to a kind of virtual world that people can walk around in, as well as the idea of making the internet more ubiquitous and interconnected.
Meanwhile, Meta’s core business is shrinking as it faces growing competition from TikTok and a shrinking advertising industry amid fears of a looming recession. The company reported its second quarterly drop in revenue this week and saw its profit cut in half from a year earlier. It sells more ads but makes less money, and user growth on its social media platforms is slowing. After hitting a $1 trillion market cap for the first time last summer, it’s now worth about a quarter, less than Home Depot.
“The business is not growing in 2022,” said Gil Luria, technology strategist at DA Davidson. “It is expected to grow in the future, but that expectation may turn out to be optimistic.”
A venture that seemed brave a year ago now seems bordering on madness. Meta lost $9.4 billion in the first nine months of 2022 on its metaverse stake and expects the entity’s losses to “increase significantly year over year” in 2023. This has even prompted some of Meta’s supporters to call for him to reconsider its strategy change. , and maybe slow it down. (It also prompted a tearful “Mad Money” host Jim Cramer to apologize to viewers for having faith in Meta’s management team and recommending investors buy the stock.)
“People are confused about what the metaverse even means. If the company invested $1-2 billion a year in this project, maybe this confusion wouldn’t even be a problem. You’d just do R&D quietly and the investors would focus on the core business ,” Brad Gerstner, CEO of Meta shareholder Altimeter Capital, wrote in an open letter to Zuckerberg this week. He urged Meta to “cap its investments in the Metaverse to no more than $5 billion per year with more discrete goals and objectives for success.”
The current pace of spending, he added, “is bloated and scary, even by Silicon Valley standards.”
Meta did not respond to requests for comment for this story.
Although the name change was first announced a year ago, Facebook’s move to Meta took years. Zuckerberg has previously said this is a long-term effort for the company, not an overnight transformation. It all started with Facebook’s purchase of Oculus VR in 2014, and in the years since, the company has rolled out a series of increasingly capable, affordable and wearable headsets.
Meta’s latest headset, the Quest Pro, is its first attempt to combine virtual reality immersion with the real world. It can display text and fine details in VR, track your eyes and facial features to give you a sense of connection with other people in virtual spaces, and show you a view of the world around you in color while allowing you to interact with digital objects — all nods to Meta’s goal of attracting more business users.
It’s a far cry from the Oculus Rift headset that was available in 2016: It cost $599, but users also had to connect it to a powerful PC and use it with a sensor camera on a tripod that came with the headset. Initially, this headset didn’t even come with tracked hand controllers; it first shipped to customers with an Xbox controller and a small handheld remote.
Although headsets have improved dramatically, virtual reality and augmented reality are still emerging technologies in pursuit of purpose and popularity. The market for VR headsets is still small compared to e.g. an established gadget market like console video games. ABI Research expects that 11.1 million VR headsets will be shipped this year, of which about 70% will be Quest 2 headsets. This is down from its estimate of 14.5 million headsets in 2021, of which Quest 2 headsets made up 85% of the total.
Some tech experts say these products have potential, including in the workplace, but in the short term their adoption by everyday users remains uncertain at best.
“I’m not sure this will translate to end users anytime soon,” said David Lindlbauer, an assistant professor at Carnegie Mellon University who directs the school’s augmented perception lab. (Meta sponsors Lindlbauer’s research into developing advanced user interfaces for augmented reality and virtual reality.)
For Zuckerberg and Meta, this creates a unique challenge.
Zuckerberg successfully shifted Facebook’s former operations from desktop to mobile shortly after taking the company public, a move that helped boost its advertising business and ensure its dominance of much of the latter. next decade. But smartphones were already ubiquitous at the time; if anything Facebook was a little late.
Now the company is trying to launch new technology and hopes that consumers will follow suit.
Meta positioned change as a kind of existential imperative for the company. After Apple’s app tracking changes hurt Meta’s ability to target ads to its users, the company doesn’t want to rely on external hardware or an app store in the future.
But there is a big difference between looking at a computer or smartphone screen and wearing a headset. While Lindlbauer can imagine wearing a headset for maybe an hour a day, alternating between immersive virtual reality views and digital images that blend into the physical world, “I think we haven’t hit the sweet spot yet place of something I want to wear all day,” he said.
Meta also faces a huge challenge when it comes to showing VR content that users like the look of and want to use repeatedly. According to a recent Wall Street Journal report, internal documents show Horizon Worlds has fewer than 200,000 monthly active users, a rounding error for a company with 3.7 billion monthly active users across its various services. (A Meta spokesperson told the Journal that it’s “easy to be cynical about the Metaverse,” but Meta thinks it’s “the future of computing”).
“They start with this idea that they want to build a big space like Horizon Worlds, where everybody just wants to show up and start building things,” said Avi Bar-Zeev, founder of AR and VR consultancy RealityPrime. and former employee. . at Apple, Amazon and Microsoft, where he worked on the HoloLens VR headset. “No virtual world has ever managed to create a canvas that people just come in and start painting.”
Zuckerberg personally came under intense criticism for how Meta views work and play interactions in virtual spaces after he posted a picture of his cartoon-like avatar in Horizon Worlds on Facebook – a picture he later admitted was “pretty basic”.
“When it comes to fast audiences, give me more, the progress we’ve seen so far is disappointing,” said Janna Anderson, director of Elon University’s Imagining the Internet Center. “Meta faces enormous ridicule on social media and in the minds of the general public.”
Quest Pro’s face tracking features can help make avatars’ facial expressions more realistic: Initially, users can access this tracking in Horizon Worlds and Horizon Workrooms, Meta said, as well as several developer apps such as Painting VR and the DJ app. XR strain.
But even with face tracking, what users see when they enter Horizon Worlds—blocky, humanoid avatars that exist only torso-up, floating around a virtual space—will persist for the rest of the world. This moment stands in stark contrast to the picture Zuckerberg painted during Meta’s Connect event on October 11 of his own full avatar.
Meanwhile, investors seem weary of investing in Metaverse at a time when the future of its core business is also deeply uncertain.
“I think to sum up what investors are feeling right now is that there are just too many experimental bets compared to the proven core bets,” Jefferies analyst Brent Thill said during Meta’s earnings call this week.
Zuckerberg, for his part, defends the change in strategy. “I would say there’s a difference between something being experimental and not knowing how well it’s going to turn out,” he replied. Separately, he added: “I think people will look back decades and talk about the importance of the work that has been done here.”