Mark Zuckerberg’s got the metaverse on his mind—and it’s a costly consideration.
Facebook revealed new financial information Monday about how much it will cost to build this digital world. The company offered investors a forecast of profit and expenses in its third quarter earnings report. In a conference call, Zuckerberg said that the $10 billion figure will likely rise in the years ahead.
To Zuckerberg, the metaverse, a bleeding-edge Silicon Valley concept positing that future social networks will rely on augmented- and virtualy-reality tech, represents a path away from his company’s existing problems: Facebook may be bigger than ever with over 3 billion users worldwide. Its popularity among young people has fallen over the past decade and the increasing antitrust scrutiny around Facebook will make acquiring any newcomer to its industry difficult (as it did for Instagram and considered doing so with TikTok, Snapchat, and TikTok). Facebook must therefore find a way of creating a new service that will attract back young users.
Zuckerberg acknowledged Facebook’s struggle to maintain popularity with this demographic in that conference call. “We’re retooling our tools to make young adults our northstar,” Zuckerberg said. In that same moment, he acknowledged this would come as the expense of aging users, a problematic base of support for Facebook—too old and too prone to sharing the misinformation that has landed the company in boiling-hot water.
The price tag is a revelation but Facebook has already made public its metaverse ambitions. Zuckerberg may tie those hopes even more directly to his company and is reportedly mulling a name change to Facebook Inc. to reflect the new focus on the metaverse, a rebirth that could be announced at Thursday’s Connect conference. Facebook already sells several VR headsets under the Oculus brand, which it acquired back in 2014. It has also introduced Horizon Worlds, an invite-only beta version of a platform that allows users to create virtual worlds and items for their metaverse.
“If you’re in the metaverse, you’ll need digital clothes and digital tools and different expeirncs,” Zuckerberg told analysts. “Our goal is to help the metaverse to reach a billion people and billions of dollars in commerce in the next decade.” Yet establishing “this foundational platform will be a long road,” Zuckerberg warned, instructing Wall Street to expect Reality Labs to lose money for years to come.
Next, Facebook will change its financial reporting structure. Reality Labs, the internal team that leads its metaverse projects is now a separate unit. This serves a dual purpose. If the metaverse succeeds, investors will have a clear view of its growth. If it doesn’t, Facebook will retain the opportunity to show that its app business—Facebook, WhatsApp, Instagram—remains profitable. Keeping the two together would make it a little harder for Facebook, which would need to consistently explain the make-up of the combined figures to investors—lest investors mistake unprofitability in the VR team for new weakness in Instagram or Facebook’s business.
Zuckerberg has assigned a top Facebook executive to run this: Andrew Bosworth, a longtime Zuckerberg friend who previously built many of Facebook’s signature features, like the NewsFeed. Bosworth, currently a vice-president in Reality Labs, will be next year chief technology officer.
The metaverse has been long in the making and has attracted more attention than Facebook. The term was coined by Neal Stephenson (a sci-fi author) in 1992. VR technology is fundamentally difficult to commercialize. Oculus was the first to develop VR headsets a decade ago. However, the first version of Oculus’ first VR headsets after Facebook was acquired was expensive, clunky, and lacked any popular apps. Competitors like Samsung and Google have tried their hands too, focusing their headsets around smartphones that weren’t powerful to produce a fully immersive experience. Magic Leap, a Florida-based startup, has raised $4 billion over nine year while shipping only one iteration its headset. Facebook has filed close to 1,500 AR and VR-related Patents. However, Samsung, Microsoft, and Sony each have nearly 2,000.
Zuckerberg appears unaffected by Facebook’s $30 billion profit to finance the metaverse push. “We believe that the metaverse to be the successor to the mobile internet. We think it’s going to unlock a massively larger creative economy than what exists today,” he said Monday, erecting “an important pillar of our company over the next decade.” A pillar he may also feel he has no choice but to try and build.