The company formerly known as Facebook is already signaling investors not to hope for much actual revenue from its metaverse project for the foreseeable future, even though the entire entity was rebranded to Meta (FB) less than nine months ago. In Meta’s latest quarterly earnings call, CEO Mark Zuckerberg suggested it could be roughly seven to 10 years before the company’s investments in building immersive virtual worlds produce any net revenue. That timeline, for many serious investors, is the functional equivalent of “never.”
The lengthy roadmap is a reminder that while Facebook pitched its pivot to Meta as a serious long-term plan, that wasn't the whole truth. In hindsight, Meta’s pivot looked at least as much like a panicked, half-cocked scramble to distract from a storm of public criticism about Facebook’s social impacts. Meta’s almost casual messaging about revenue expectations from its new namesake concept stands in stark contrast to blockchain-based metaverses like Decentraland, which if nothing else seem to actually care about succeeding.
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At Facebook/Meta, though, Wednesday’s call made clear the metaverse is little more than a public relations tool.
The most pointed moment came when Zuckerberg was asked for a timeline for actual returns from the Reality Labs segment of the company, which houses virtual reality (VR) hardware maker Oculus and the virtual space Horizon Worlds.
“I expect this to be later this decade,” said Zuckerberg of the timeline for metaverse adoption. “… This is laying the groundwork for a very successful 2030s, when this is more established as the primary computing platform.”
This is an absolutely harebrained thing for the CEO of a massive corporation to say about its supposed marquee project. I have a friend who runs money for a major pension fund, and he once told me something very basic and obvious, but crucial: Serious institutional investors don’t make bets more than five years into the future, and usually no more than two. Big banks and major Wall Street funds have seen it all before, and they’ve learned that beyond a certain point you genuinely can’t predict the future. They care about what your revenue is going to look like six months or a year from now, not a decade hence.
Of course, angel investors and seed-round venture capitalists love to take small, multi-year, longshot bets, and big companies like Google parent Alphabet (GOOG) have R&D divisions developing unprofitable but forward-looking “other bets.” But Google never renamed itself “Project Loon,” because banks and other behemoths that deal in much bigger numbers want a lot more certainty than an R&D longshot can provide. So when Zuckerberg says, “this will take 10 years,” what serious investors hear is, “this is a complete gamble and maybe not real at all and we had no substantive reason to rebrand around it. Ignore it.”
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Zuckerberg seemed to pump the brakes on metaverse expectations again later in the call in response to a similar question: “I think that the cycle here between investment and meaningful enough revenue growth to be near or very profitable [for metaverse projects] is going to be long. I think it's going to be longer for Reality Labs than for a lot of the traditional software that we've built.”
Instead, the call heavily featured Chief Operating Officer Sheryl Sandberg drilling down into the minutiae of new and upcoming advertising products across … Well, they mostly talked about Instagram and Reels, two good but hardly game-changing products at this point.
Meta is ultimately a media company reliant on advertising, and nothing more. The emphasis on Sandberg’s dry-as-dust advertising pitch clearly showed a genuine desire to shore up investor confidence in actually existing products, in the face of new ad sales challenges from iOS data-sharing changes and the loss of users from Russia.
There were other, subtler hints of internal ambivalence towards metaverse and Reality Labs projects. There was a lot of talk on the call about slowing spending, a sensible reaction to uneven sales and user growth for Meta’s actual products. Zuckerberg specifically noted that “we are now planning to slow the pace of some of our investments” – that is, internal spending on long-term projects – in a group of projects including Reality Labs.
But when an AB Bernstein analyst later asked about investment levels in metaverse projects specifically, Zuckerberg seemed to dodge the question. “We're shifting the bulk of the energy inside the company toward those high-priority areas, away from other areas,” Zuckerberg said – without specifying whether the metaverse is a high priority. Based on the call’s substantive focus on driving Instagram ad revenue, it sure doesn’t seem to be.
Reality Labs expenses grew 55% to $3.7 billion in Q1, which suggests real commitment, but Zuckerberg’s talk of reducing investment was phrased in forward-looking terms, so that’s not necessarily the case. Some clearer first-quarter data should be available in regulatory filings soon, but what executives say in a public call is at least as worthy of scrutiny as the actual numbers. It’s a safe bet that Meta’s communications team is larger than CoinDesk’s entire staff, and they’ve surely gone to unbelievable lengths to massage this messaging – but sometimes that just makes it easier to spot the sculptor’s hand.
And here’s the real head-scratcher: If the metaverse is such a long-term project that Meta’s CEO and founder is downplaying its prospects in an earnings call, why was there such a media blitz around the company rebrand and the big new metaverse quest in the first place?
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You’re not supposed to remember, but the Meta pivot immediately followed a wave of negative press for Facebook in early and mid 2021. In fact, Facebook announced its rebrand to Meta just weeks after former Facebook data scientist Frances Haugen broke ranks to disclose the company had, among other troubling practices, ignored its own research about the ways its products harm children.
Rather than continue to weather that storm, Facebook announced that it was now “a metaverse company.” Yay! That served a dual purpose, with a certain subset of investors wowed by the big new thing and critics like me having a field day gleefully tearing it to shreds.
It was clear from Wednesday’s call that the distraction has worked. There was not one question about content moderation on Meta platforms. That’s a huge win, particularly because there’s little evidence the company has actually solved the problem. It doesn’t matter if Horizon Worlds ever catches on, or if the metaverse behind Meta ever fully comes to fruition – for the former Facebook it might be worth a few billion dollars just to change the channel.