Despite the large expenditure on the metaverse, Meta’s profit dropped in 2021

The Meta founder said his company was going all-in on the metaverse last year. On Wednesday, he discussed the costs of implementing that effort. As Facebook founder Mark Zuckerberg built the company, the company’s Reality Labs division lost more than $10 billion in 2021 as it built the business. The division makes virtual-reality goggles, smart glasses, and other yet-to-be-released products. Mr. Zuckerberg’s vision of the metaverse revolves around those products, a platform for sharing virtual worlds and experiences on multiple platforms and software.

Meta revealed its hardware division results for the first time. Due to the company’s dependence on social networking and digital advertising. It has not provided those numbers in the past because virtual-reality headsets make a relatively small portion of its overall business. Facebook invested more than $5 billion in the metaverse in 2014, more than five times its purchase price of the Oculus VR business, and ten times its purchase price of Instagram in 2012.

Spending in the quarter ending in December weighed on Meta’s quarterly profits. That fell 8 percent to $10.3 billion from $10.3 billion a year earlier despite revenue rising 20 percent, to $33.7 billion, in that period. According to Wall Street analysts, profits were about $10.9 billion on revenue of $33.4 billion.

Meta Facing Issues

Meta said another shift made by a rival tech giant impacted its social networking businesses, including Facebook and Instagram. As a result of changes Apple made to its mobile operating system last year, Meta said it expected its financial performance to suffer. Apple has made it more difficult for apps to track iPhone users’ digital habits. Due to this move, social networking companies have had less data they can use to serve targeted ads. According to Meta, the changes will cause it to lose about $10 billion in ad revenue this year.

The increased spending on the metaverse combined with Apple’s changes. That has created a difficult transition period for Facebook as it turns into Meta. This was highly unusual for a company that for years ran on top of the financial charts like clockwork. Never faltering even in the face of scandals involving privacy, misinformation, and other toxic content. Meta’s shares plunged almost 22 percent in after-hours trading Wednesday after it released its earnings report.

Following Meta’s disclosure of its results, Meta’s CEO, Mark Zuckerberg, acknowledged the issues. “Although our direction is clear, it seems that our path ahead is not quite perfectly defined,” he said. Nonetheless, he described his company as having weathered challenges before and defended its shift to the metaverse. “Ultimately, our continued success relies on building products that people find valuable and that people want to use,” Mr. Zuckerberg said.

Opting for new path

Meta has been attempting to diversify away from social networking controversies involving misinformation and hate speech for years now, primarily by reducing its dependence on Apple. Towards the metaverse, Zuckerberg announced in October that he planned to take his company down a new path. Facebook with a different name, Meta. During that period, the company went through a sweeping transformation, restructuring itself and encouraging employees to join teams working on augmented reality and virtual reality.

Its spending isn’t expected to subside anytime soon, mostly because it’s in a full-throttle race. That it has with other technology companies to claim its share of the metaverse. Even though Activision does not make virtual reality games. Microsoft cited the acquisition as a building block for the metaverse when it said it was buying the video game maker Activision Blizzard for nearly $70 billion last month. Metaverse-related technology has been developed by Google for years, and Apple is developing its own devices.

Reels

While Meta’s wildly profitable businesses are changing, its wildly profitable business model is largely unchanged. Meta’s chief operating officer, Sheryl Sandberg, said on a call with investors Wednesday that Instagram is heavy-handedly promoting a video service in competition with TikTok called Reels. While Reels is a major contributor to Instagram’s growth, it does not make the same amount of money from advertising as other Instagram products like Stories and the main photo feed.

Additionally, Mr. Zuckerberg pointed out that TikTok is increasingly popular with younger audiences, and has shown difficulties competing with it. The ad business of Google, which is independent of Apple for advertising data. Has benefited from Apple’s iOS changes, Meta’s chief financial officer David Wehner said. As compared to the same quarter last year, Google’s parent company, Alphabet, posted a 36 percent profit boost and a 32 percent revenue increase during the last quarter of 2021.

Although Meta’s social networking apps continued to grow in popularity, the number of users continued to rise. As of the third quarter, Facebook, Instagram, WhatsApp, and other apps. All had a combined 3.59 billion monthly active users, a 9 percent increase over a year ago. Each week, over one billion users use services like WhatsApp and Messenger to interact with business accounts.

However, the main Facebook app appeared to be at the end of its lifecycle in at least some markets; the app lost one million users globally for the first time since it launched a year ago. On the Nasdaq, Meta plans to change its ticker symbol from FB to META, which will become the new symbol for its stock.

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