Mark Zuckerberg is pessimistic about the economy.
The chief executive of Meta Platforms (META), parent of Facebook, Instagram and WhatsApp, expects a hard landing and has warned the employees of the social media giant.
"If I had to bet, I'd say that this might be one of the worst downturns that we've seen in recent history," Zuckerberg told staff on June 30 during the traditional weekly Q&A session.
A recession or even a sharp slowdown in the economy should hurt Meta's profit and revenue, especially those generated by online advertising. Analysts fear in particular that companies will reduce their marketing and promotional budgets, which should result in less advertising and -- no doubt -- renegotiation of ad prices.
Faced with this new situation, Zuckerberg has set six priorities on which the social-media giant must focus to preserve its profitability and emerge stronger from a possible recession: the metaverse, privacy, artificial intelligence, Reels, messaging (WhatsApp and Messenger) and monetizing services for ads.
Zuckerberg Doubles Down on the Metaverse
One of the first priorities of Zuckerberg and Meta has been and remains the metaverse, which is an immersive world in which we are called upon to interact through avatars and with the help of technological hardware such as virtual-reality headsets.
Zuckerberg considers the metaverse the next big thing for Meta, in the face of a good deal of skepticism, even mockery, from the tech world.
"Avatars and Horizon Worlds + Platform remain the key priorities, and our focus now is on execution," Chief Product Officer Chris Cox said in a recent internal memo seen by TheStreet. "On Avatars, we need to finalize our new art style, fully launch our avatar art store, and improve avatar experiences across VR and the family of apps.
"In Horizon, we’re focused on the core experience -- increasing growth and retention through improved performance & reliability, launching cross-screens, integrations across the family of apps, and building new social experiences in the product."
Horizon Worlds is Meta's social metaverse platform for Quest VR headsets. The company is planning to take an overall cut of up to 47.5% on the sale of digital assets on Horizon Worlds by creators.
Of this 47.5% charge, almost two-thirds (30%) of it is a hardware-platform fee for sales made through Meta Quest Store, where it sells apps and games meant for its VR headsets, and a bit more than a third (17.5%) cut is its Horizon platform fee.
The manufacturer of the Meta Quest headset is working on its newest VR headset, which is specifically designed for work. Named Project Cambria, it was announced in October 2021 and promises to mirror users' facial expressions in VR for a more realistic metaverse experience.
"In hardware, we are laser-focused on the successful launch of Cambria in [the second half of the year], which inaugurates our prosumer/industrial-grade mixed-reality product line," Cox wrote in the memo.
Privacy Is a Major Challenge
The Meta Quest headset sold 8.7 million units in 2021, indicating that it has an audience for VR beyond the videogame-centric base for which it was originally created.
But the company's projects related to the metaverse will have "significant" financial losses over the next three to five years, Zuckerberg told shareholders at the annual meeting on May 25. For the first quarter, Reality Labs, the division that houses Meta's metaverse plans, posted a $2.96 billion loss on revenue of $695 million.
Monetizing Reels, Meta's response to the success of popular short-video app TikTok, and meeting the challenges posed by new privacy changes are also in the strategic roadmap because the dangers to income they pose are substantial.
The second half of the year "will see complex companywide efforts kick off for major new requirements (the DMA, the DSA, and new US state and international laws), which will touch virtually all product teams," Cox said. He referred to the Digital Markets Act and the Digital Services Act, two European laws that aim to rewrite the rules of the internet.
The DMA targets the lack of competition in digital markets; the DSA is concerned primarily with transparency and consumer protection.
"We are also going to focus on increasing privacy review efficiency and work to make privacy review less disruptive for product teams while upholding our commitments," Cox promised.
In addition to the regulations, Meta also suffers from the fact that last year, Apple (AAPL) gave users more control over their privacy settings when they downloaded apps.
The new feature is called App Tracking Transparency and all third-party apps need to receive permission from users before the companies can track their movements online for ad targeting.
Meta also intends to focus on artificial intelligence, monetize its products and services and add new services to WhatsApp and Messenger.
