![]() ![]() That's why Microsoft bought a successful gaming company, Activision Blizzard, to enter the maybe-soon-to-be market. "What is the metaverse? Metaverse is essentially about creating games," he told The Financial Times.Īnd while Nadella went on to explain that the technology could potentially expand to other areas, like business conferences, Microsoft will be approaching the evolution of metaverse technology from its already-established gaming division. Zuckerberg wants the market to believe the metaverse is another place where people will spend all of their time, but Microsoft CEO Satya Nadella's assessment of the concept (because that's still what it is) is more accurate. No one wants spend a lot of time in the metaverse, no matter how much Mark Zuckerberg wants to think they will. And the metaverse investment losses are going to get even steeper in 2022, when Meta expects "total expense growth rates may significantly exceed our year-over-year revenue growth rates." Revenue for that segment, from sales of the Oculus goggles and games, came in at less than $1 billion in the fourth quarter, and well below analyst projections for the year. The company blew through $10 billion making metaverse investments last year, from hiring new employees to buying new data centers. This quarter, Meta started sharing its numbers for its metaverse business, and the figures are a disaster. But unlike the last time he built a place online, this one is going to take billions of dollars just to build because of its scale and complexity. Zuckerberg is taking an "if you build it they will come" approach to the metaverse. The problem with that is there's no "there" there. The metaverse is not a thingĮven as its current business shows signs of existential weakness, Zuckerberg wants investors to focus on the future. ![]() In other words: Facebook's cash cow is aging. "Facebook is seeing a significant slowdown in advertising growth while embarking on an expensive, uncertain, multi-year transition to the Metaverse," JP Morgan analyst Doug Anmuth wrote to clients after he downgraded the outlook for its stock.Īnumth continued: "We believe management's tone around iOS impact has deteriorated, and what was once described as 'manageable' now appears to be a $10 billion revenue headwind in 2022." Now we're seeing this diminishment of "cool" show up in the user numbers, even though Facebook still doesn't share precise data about user engagement - the most crucial aspect of its business - on any of its platforms. Zuckerberg admitted that Facebook faces an "unprecedented level of competition" from TikTok, the video-sharing social network that's growing rapidly among Gen Z. The Facebook Papers, leaked last fall, showed us that the company knows it is losing its appeal to younger customers. The company's flagship Facebook platform also saw a decline in global daily active users for the first time ever in the fourth quarter of 2021, which will naturally take another bite out of the advertising business. Thiago Prudencio/SOPA Images/LightRocket via Getty Images Meta's core apps - Facebook, WhatsApp, and Instagram - are hitting a ceiling: global users dropped for the first time ever in the fourth quarter. The company estimated that the privacy changes could shave $10 billion off its advertising revenue in 2022. The company admitted as much in its annual filing, saying that Apple's decision to allow iPhone users to opt out of being tracked by advertisers has made Meta's advertisements less precise and useful for ad buyers. Meta's advertising product - which accounted for 97.4% of its 2021 revenue - simply isn't as good as it used to be. While this sell-off may seem extreme, it's completely rational when you look at the company's fundamentals. It hasn't gotten any prettier since: The stock is now down more than 30% over the past month and was worth $267 billion less then before earnings as of Wednesday's market close. All told, $240 billion was shaved off its market capitalization. February 3, the day after the company's earnings, Meta's stock dropped by over 26% and registered the largest single-day value wipeout in US history. ![]() If you want to know how large the collective anxiety is over Meta's future, look no further than its stock.
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