() — Even by Facebook standards, 2021 was a tough year.
A series of damning reports based on whistleblower leaks raised uncomfortable questions about Facebook’s impact on society; the company continued to be reeling from concerns about its platform being used to stage the Jan. 6 riots on Capitol Hill; and Apple’s privacy changes threatened its core advertising business. Meanwhile, young users were flocking to TikTok.
At a virtual reality event held on October 28, 2021, CEO Mark Zuckerberg tried to turn the page. Zuckerberg announced that Facebook would change its name to Meta and would dedicate to build a future version of the internet called the “metaverse,” proving to everyone in the process that the company he launched in 2004 was more than just a social media business.
A year and billions of dollars later, the so-called metaverse still seems years away, if it ever manifests at all. And the company formerly known as Facebook is still very much a social media business, facing more financial pressure than when it announced the change.
A sign in front of Meta headquarters on April 28, 2022 in Menlo Park, California. (Photo: Justin Sullivan/Getty Images)
Meta’s Quest 2 VR headset, released two years ago, is popular in its category, but remains a niche product overall. The much more expensive Quest Pro is aimed at businesses and likely won’t become a consumer product. And Meta’s flagship Horizon Worlds VR social app can feel like a ghost town (albeit a ghost town with laser games).
Although some brands have since bet on the metaverse, even hiring “bosses of the metaverse“, it’s not clear whether consumers actually want to work or play in it, or even know what this hard-to-define term means. The metaverse refers, in general, to a kind of virtual world where people can walking around, 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 an ad sector shrinking on recession fears. This week, the company reported its second quarterly drop in income in history and cut its earnings in half from the previous year. It’s selling more ads but making less money from them, and user growth on its social media platforms is slowing. After reaching a market capitalization of $1 trillion for the first time last summer, it is now worth a quarter of that, or less than Home Depot.
“The business is not growing in 2022,” said Gil Luria, technology strategist at DA Davidson. “There is an expectation that it will grow in the future, but that expectation may turn out to be optimistic.”
A gamble that seemed daring a year ago now seems borderline insane. Goal lost $9.4 billion in the first nine months of 2022 in his metaverse efforts and expects the unit’s losses to “grow significantly year over year” in 2023. This has caused even some of Meta’s supporters to urge him to rethink his change of heart. strategy, and possibly to stop it. (It also prompted a distraught “Mad Money” host Jim Cramer to apologize to viewers for trusting Meta’s management team and advising investors to buy the stock.)
“People are confused about what the metaverse means. If the company were to spend $1 billion to $2 billion a year on this project, that confusion wouldn’t even be a problem. You’d just quietly do R&D and investors would be happy.” focus on the core business,” Brad Gerstner, CEO of Meta shareholder Altimeter Capital, wrote in a statement. open letter to Zuckerberg this week. He urged Meta to “limit its investments in the metaverse to no more than US$5 billion a year with more discreet goals and measures of success.”
The current pace of spending, he added, “is overblown and frightening, even by Silicon Valley standards.”
Meta did not respond to requests for comment for this story.
A sudden change that has been years in the making
Although the name change was announced just a year ago, the move from Facebook to Meta has been years in the making. Zuckerberg has said in the past that it was a long-term bet for the company, not an overnight transformation. He started with Facebook’s purchase of Oculus VR in 2014, and since then the company has released a series of increasingly capable, affordable and portable headsets.
Meta’s latest helmet, the Quest Pro, is its first effort to blend virtual reality immersion with the real world. It can display text and fine details in virtual reality, 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 of which nods to Meta’s goal of attracting more business users.
It’s a far cry from the Oculus Rift headset available in 2016: That one cost $599, but users also had to hook it up to a powerful PC and use it with a sensor camera on a mount that followed the headset. At first, that helmet didn’t even come with tracking thumbsticks; it initially shipped to customers with an Xbox controller and a small handheld controller.
Although headsets have gotten much better, virtual reality and augmented reality are still emerging technologies looking for purpose and popularity. The market for virtual reality headsets is still very small compared to that of established devices such as console video games. ABI Research forecasts that 11.1 million virtual reality headsets will ship this year, of which, according to their forecasts, 70% will be Quest 2 headsets. This is a decrease from their estimate of 14.5 million headsets. in 2021, of which the Quest 2 represented 85% of the total.
There is potential for these products, some tech experts say, even in the workplace, but in the short term their adoption by everyday users remains uncertain at best.
“I’m not sure this is going to trickle down to end consumers any time soon,” says David Lindlbauer, an associate professor at Carnegie Mellon University who heads the school’s Augmented Perception Laboratory. (Meta sponsors Lindlbauer’s research on developing advanced user interfaces for augmented reality and virtual reality.)
A helmet is not a smartphone
For Zuckerberg and Meta, this presents a unique challenge.
Zuckerberg already managed to move Facebook’s operations from desktop computers to mobile devices shortly after the company went public, a move that helped boost its advertising business and ensure its dominance for much of the next decade. But smartphones were already ubiquitous at the time; if anything, Facebook was a little late.
Now the company is trying to spearhead a new technology and hopes consumers will follow suit.
Meta has placed 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 any third-party hardware or app stores in the future.
But there is a big difference between looking at a computer or smartphone screen and wearing a helmet. Although Lindlbauer envisions wearing the headset for an hour a day, alternating between immersive views in virtual reality and digital images blending with the physical world, “I think we haven’t hit the sweet spot yet for something you want to wear all day. day,” he says.
Meta also faces a huge challenge in displaying VR content that users like and want to use repeatedly. According to a recent report From The Wall Street Journal, internal documents show that Horizon Worlds has fewer than 200,000 monthly active users, a manifest 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’re starting with this idea that they want to build a big space like Horizon Worlds where everybody is going to show up and start building things,” said Avi Bar-Zeev, founder of augmented reality and virtual reality consultancy RealityPrime and Former employee of Apple, Amazon, and Microsoft, where he worked on the HoloLens VR headset. “There is no virtual world that has been successful in building a canvas that people come and start painting.”
Zuckerberg personally received intense criticism for the way in which Meta conceives work and leisure interactions in virtual spaces, after post on Facebook an image of his blocky, cartoony avatar in Horizon Worlds, an image he later admitted was “pretty basic.”
“When it comes to the public rushing to get involved, the progress seen so far is disappointing,” said Janna Anderson, director of Elon University’s Imagining the Internet Center. “Meta is suffering tremendous ridicule on social media and in the general public spirit.”
Quest Pro’s face-tracking capabilities can help make avatars’ facial expressions appear more realistic: Users can initially access this tracking in Horizon Worlds and Horizon Workrooms, Meta said, as well as in various developer apps such as Painting. VR and DJ Tribe XR app.
But even with facial tracking, what users see when they enter Horizon Worlds – blocky avatars that only exist from the torso up, floating around a virtual plaza – will still stand in stark contrast to the image Zuckerberg portrayed during the event. Meta Connect on October 11 of your own full-body avatar.
Investors, meanwhile, appear to be fed up with investing in the metaverse at a time when the future of its core business is also deeply uncertain.
“I think investor sentiment right now is that there are too many experimental bets versus proven core bets,” Jeffries analyst Brent Thill said on Meta’s earnings call this week.
Zuckerberg, for his part, defends the change in strategy. “I’d say there’s a difference between something being experimental and not knowing how good it’s going to end up being,” he replied. On the other hand, he added: “I think people are going to look back decades from now and talk about the importance of the work that was done here.”
