Even by Facebook standards, 2021 has been a tough year.
A series of damning reports based on whistleblower leaks have raised uncomfortable questions about Facebook’s impact on society; the company is still reeling from concerns about its platform being used to stage the Jan. 6 Capitol riot; and Apple’s privacy changes threatened its core advertising business. Meanwhile, younger users were flocking to TikTok.
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During a virtual reality event on October 28, 2021, CEO Mark Zuckerberg attempted to move on. Zuckerberg announced that Facebook would change its name to Meta and move forward in building a future version of the Internet called the “metaverse” to prove to everyone in the process that the company he founded in 2004 was more than just a social media company.
A year and billions of dollars later, the so-called metaverse still seems years away, if it ever manifests itself. And the company formerly known as Facebook is still a social media company, one facing more financial pressure than when it announced the change.
Meta’s Quest 2 consumer VR headset, released two years ago, is popular in its category, but overall remains a niche product. Its newest headset, the much more expensive $1,500 Quest Pro, is aimed at business customers and probably won’t change things with everyday consumers. And Meta’s flagship social VR app, Horizon Worlds, may seem like a ghost town (albeit a laser-tagged ghost town).
While some brands have since made measured bets on the Metaverse, including hiring “Metaverse CEOs,” it’s unclear whether consumers actually want to work or play there, or even know what this hard-to-define term means. The metaverse generally refers to a kind of virtual world that people can walk around in, 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 a shrinking ad industry amid fears of a looming recession. The company announced its second quarterly drop in revenue this week and saw its profit halve from a year earlier. It sells more ads but makes less money, and user growth on its social media platforms is slowing. After hitting a $1 trillion market cap for the first time last summer, it’s now worth about a quarter of that, less than Home Depot.
“The business is not growing in 2022,” said Gil Luria, technology strategist at DA Davidson. “It is expected to grow in the future, but that expectation may turn out to be optimistic.”
A gamble that seemed audacious a year ago now appears to be on the brink of madness. Meta lost $9.4 billion in the first nine months of 2022 on its metaverse efforts and expects unit losses to “increase significantly year over year” in 2023. (He also had “Mad Money” host Jim Cramer tearfully apologize to viewers for trusting Meta’s management team and advising investors to buy the stock.)
“People are confused by what the metaverse means. If the company spent $1-2 billion a year on this project, this confusion might not be a problem. It would just quietly do research and development and investors would 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 $5 billion per year with more discrete goals and success metrics.”
The current pace of spending, he added, “is inflated and frightening, even by Silicon Valley standards.”
Meta did not respond to requests for comment on this story.
Although the name change was announced just a year ago, the move from Facebook to Meta took years. Zuckerberg has said in the past that this is a long-term bet for the company, not an overnight transformation. It all started with Facebook’s purchase of Oculus VR in 2014, and in the years since, the company has released a series of increasingly capable, affordable and portable headsets.
Meta’s latest viewer, 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 are nods to Meta’s goal of attracting more business users.
That’s a far cry from the Oculus Rift headset available in 2016: It cost $599, but users also had to plug it into a powerful PC and use it with a sensor camera on a mount that followed the headset. At first, these headphones didn’t even come with tracked manual controls; it was first shipped to customers with an Xbox controller and a small handheld remote.
Although headsets have improved dramatically, virtual reality and augmented reality are still nascent technologies in search of purpose and popularity. The market for virtual reality headsets is still small compared to, say, an established market for devices like console video games. ABI Research expects 11.1 million VR headsets to ship this year, of which around 70% will be Quest 2 headsets. This is below its estimate of 14.5 million headsets in 2021, of which headsets Quest 2 accounted for 85% of the total.
Some tech experts say these products have potential, even in the workplace, but in the short term, their adoption by everyday users remains uncertain at best.
“I’m not sure this will translate to end users any time soon,” said David Lindlbauer, an assistant professor at Carnegie Mellon University who heads the school’s augmented perception lab. (Meta sponsors Lindlbauer’s research on developing advanced user interfaces for augmented reality and virtual reality.)
For Zuckerberg and Meta, this creates a unique challenge.
Zuckerberg successfully shifted Facebook’s previous operations from desktop to mobile soon after taking the company public, a move that helped boost his advertising business and ensured his 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 launch a new technology and hopes that consumers will do the same.
Meta positioned change as a kind of existential imperative for the business. After Apple’s app tracking changes damaged Meta’s ability to target ads to its users, the company doesn’t want to rely on external hardware or an app store in the future.
But there is a big difference between looking at a computer or smartphone screen and wearing headphones. While Lindlbauer can imagine wearing a headset for maybe an hour a day, alternating between immersive virtual reality views and digital images blending with the physical world, “I think we’re not yet at the sweet spot of something I want to wear all the time.” day”. . , “she said.
Meta also faces a big challenge when it comes to displaying VR content that users like and want to use repeatedly. According to a recent Wall Street Journal report, internal documents show that Horizon Worlds has fewer than 200,000 monthly active users, a rounding error for a company with 3.7 billion monthly active users across its various services. (A spokesperson for Meta 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 the idea that they want to build a big space like Horizon Worlds where everyone is going to show up and start building things,” said Avi Bar-Zeev, founder of AR and VR consultancy RealityPrime and a former employee. . at Apple, Amazon, and Microsoft, where he worked on HoloLens VR headsets. “No virtual world has ever succeeded in creating a canvas that people walk into and start painting on.”
Zuckerberg personally came under intense criticism for the way Meta views work-play interactions in virtual spaces after posting an image of his blocky cartoon avatar in Horizon Worlds on Facebook, an image he later admitted was ” pretty basic.”
“When it comes to fast-twitch audiences, give me more, the progress we’ve seen so far is disappointing,” said Janna Anderson, director of the Internet Imagination Center at Elon University. “Meta suffers tremendous ridicule on social media and in the minds of the general public.”
Quest Pro’s face-tracking capabilities can help make facial expressions on avatars more realistic: Initially, users can access this tracking in Horizon Worlds and Horizon Workrooms, Meta said, as well as in several developer apps. such as Painting VR and DJ. XR Tribe.
But even with face tracking, what users see when they enter Horizon Worlds — blocky, human-like avatars that exist only torso-up, floating around a virtual plaza — will continue for the rest of the world. the image Zuckerberg painted during Meta’s Connect event on October 11 of his own full avatar.
Investors, meanwhile, seem fed up with investing in the Metaverse at a time when the future of its core business is also deeply uncertain.
“I think to sum it up, what investors feel right now is that there are too many experimental bets compared to the proven basic bets,” Jeffries analyst Brent Thill said during Meta’s earnings call this week.
Zuckerberg, for his part, defends the change in strategy. “I’d say there’s a difference between something that’s experimental and not knowing how good it’s going to end up being,” he replied. Separately, he added: “I think people will look back decades and talk about the importance of the work that has been done here.”
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