Analysts are now using stark terms when describing their displeasure over Meta's bet on virtual reality — calling the losses "supersized and terrifying."
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Mark Zuckerberg is facing growing calls to focus less on the metaverse — and slash the budget of the tech giant's struggling Reality Labs division.
It comes after Meta posted some gloomy earnings of $4.4 billion in the third quarter… down 52% compared with the same period a year ago.
Meta's share price plummeted 20% in after-hours trading on Wednesday evening as investors digested the news, with critics arguing that Zuck's ambitious bet on the metaverse isn't working.
The embattled company — which owns Facebook, Instagram and WhatsApp — has been struggling with a slowdown in ad revenues as younger consumers flock to TikTok instead.
Zuckerberg announced that Facebook would change its name to Meta last year to reflect its push into virtual reality, and it's currently spending $10 billion a year on the metaverse.
But it's yet to reap the rewards of this investment — and between July and September alone, Reality Labs suffered staggering losses of $3.67 billion.
To make matters worse, the company has warned that these operating losses are only set to increase next year — prompting some analysts to declare that enough is enough.
Meta has recently been rocked by a series of reports that revealed Horizon Worlds, its flagship metaverse, is on "quality lockdown."
According to The Verge, things have gotten so bad that even Meta's developers aren't using it — prompting furious memos from executives.
This was followed up by Wall Street Journal reporting that revealed the company has slashed its target for monthly active users from 500,000 to 280,000. Despite that, it's attracted just 200,000.
'Supersized and Terrifying'
Analysts are now using stark terms when describing their displeasure over Meta's bet on virtual reality — calling the losses "supersized and terrifying."
And some shareholders are now writing to Zuckerberg directly — pleading with him to slash the tech giant's spending on the metaverse.
Altimeter Capital's CEO Brad Gerstner has called for Reality Labs' budget to be halved to $5 billion, and 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."
Other analysts have warned that some of the pressing problems facing Facebook and Instagram are being ignored — and Meta desperately needs to turn its business around. Insider Intelligence analyst Debra Aho Williamson said:
"As Facebook Inc., it was a revolutionary company that changed the way people communicate and the way marketers interact with consumers. Today it's no longer that innovative groundbreaker."
The results weren't all doom and gloom, as Facebook's monthly active users have risen 2% year on year to 2.96 billion. When you throw in Instagram and WhatsApp as well, a grand total of 3.71 billion are using Meta's apps — a 4% rise.
Zuckerberg Defensive
Despite countless critics questioning the company's "experimental bets," Zuckerberg defended his strategy and suggested skeptics were being short-sighted.
"It would be a mistake for us to not focus on any of these areas that will be fundamentally important to our future."
He went on to insist that Meta is doing "leading work" and its cutting-edge products will mature "in different periods of time over the next five to ten years."
Nonetheless, there's no getting away from the fact that Meta's virtual reality headsets — which offer the best experience in the metaverse — are eye-wateringly pricey.
Its newly unveiled Quest Pro product costs $1,500, and PP Foresight analyst Paolo Pescatore likened Meta's current strategy to "one big gamble given the economic crisis."
"People are not rushing out of their seats to buy a VR headset or even watch 360-degree videos … The new device still feels like an expensive toy."
Indeed, the WSJ report also included figures that revealed more than half of $400 Quest headsets are unused six months after purchase.
This indicates that early adopters who are curious enough to dig deep into their pockets aren't overly enamored with the experience they're getting
