Meta Platforms (NASDAQ:META) has seen better days.
As the company steps once again into defense mode over a massive wave of layoffs, all eyes turn to CEO Mark Zuckerberg and his hopes to replicate Facebook’s Web 2 success by developing an early version of the metaverse.
Several issues — from technical to cultural — are still preventing Meta’s success in the metaverse and are causing quarterly losses for the tech giant.
Mark Zuckerberg And A Dream Of The Metaverse
Meta started 2022 on the wrong foot, as the world learned the user base for Facebook, the company’s flagship product, declined for the first time in its 17-year history.
On Wednesday, Zuckerberg announced with an air of grief that the company will be letting go of 11,000 employees, or about 13% of its workforce of 87,000.
Zuckerberg blamed himself for the unsustainable overgrowth, based on expectations of growth for the entire e-commerce sector that didn’t come to fruition.
The markets responded well to Zuckerberg’s hand in becoming more capital efficient, and Meta stock has surged more than 12% since the announcement.
But former employees are putting some of the blame on Zuckerberg’s “obsession” with the metaverse.
One year ago, Meta left its old name of Facebook to adopt a branding more in line with its metaverse strategy in an effort to become an early driver of the technology. Since then, CEO Zuckerberg has become a messianic figure for the metaverse, putting the new technology at the centerstage of his public discourse.
Setting aside any moral discussion over whether the next iteration of the internet should be run by one single, for-profit company, it is safe to say the underlying technology needed for the metaverse to become ubiquitous is still in developmental stages.
Betting On The Metaverse
Yat Siu, co-founder and executive chairman of Animoca Brands, a VC in the VR/AR space, defines the metaverse as “an open, decentralized network of systems and environments connected by true digital ownership, interoperability, and community governance.”
Zuckerberg is usually content to describe a less ambitious metaverse, one in which digital communication is enhanced by virtual reality and augmented reality.
The jury is still out on whether the internet of the future will revolve around 3D avatars and VR devices. But in the same letter announcing the layoffs, Zuckerberg reaffirmed the company’s “long-term vision for the metaverse” as one of Meta’s high-priority growth areas where the reduced workforce will now be focusing.
Zuckerberg has been criticized in the past for his risk-taking history, which includes a far-from-obvious decision to acquire Instagram for $1 billion in 2012, at a time when that figure equaled Facebook’s entire net income for the previous year.
That call, as history shows, was a success. But can Mark do it again?
Where Is Meta’s Metaverse Today?
Whether Zuckerberg’s high-stakes bet on the metaverse will get his company back on track in the medium- to long-term is still to be seen.
Yet for the time being, the company is still struggling to make the metaverse happen.
Facebook’s portrayals of the metaverse often include unrealistic representations of 3D avatars interacting seamlessly inside virtual worlds.
In reality, Horizon Worlds, the company’s virtual 3D social-media app, continues to lack many of the features needed for massive adoption.
According to internal communications obtained by The Verge, Horizon Worlds continues to present many technical issues, including bugs and poor graphics quality.
Internal documents also show the user count for the app is 200,000 active users, well below the 300,000 announced earlier this year.
The number can seem high from an abstract point of view, but it’s not significant considering that Meta has often encouraged its — formerly — 87,000 employees to use the app, and that Facebook had roughly 2.96 billion monthly active users as of the third quarter of 2022.
As per internal memos gathered by The Wall Street Journal, most visitors to Horizon Worlds generally don’t return after the first month, which is the reason its user count to dropped so substantially.
Meta launched Horizon Worlds less than a year ago for the Oculus Rift S and Oculus Quest 2 headsets, both sold by Meta’s subsidiary Reality Labs, which is the corporate sprout of Oculus, a company that Meta acquired in 2014.
“Feedback from our creators, users, playtesters, and many of us on the team is that the aggregate weight of papercuts, stability issues, and bugs is making it too hard for our community to experience the magic of Horizon,” wrote Meta’s VP of Metaverse Vishal Shah in a letter to employees in September.
But gameplay issues are only one aspectof Meta’s challenges to get its metaverse business to lift off.
Last month, Meta announced the launch of the Meta Quest Pro, its new VR headset aimed at creators, which is now available at $1,500: a price that will be prohibitive for most consumers outside of the VR niche.
The previous entry-level model runs at $399, but it’s a clunky helmet-like device that is most likely to be used indoors and makes the user look like they came out of a Star Trek movie.
Meta has announced that it’s developing a web version of Horizon Worlds that could be accessed from a normal computer. But there’s no guarantee that this version will offer any differentiator as a social media platform against Meta’s own social media products for users to want to adopt it, or even that it will be able to compete with metaverse giants like Fortnite or Roblox (NYSE:RBLX).
In the meantime, Meta’s Metaverse ventures are likely to continue to be a source of loss for the company. Worldwide adoption of new disruptive technologies like the metaverse take time and in this case, also require the development of new technology like better servers, faster mobile internet connections and more accessible and wearable versions or VR/AR devices.
Shutterstock image.
