Mark Zuckerberg has the metaverse in his head — and it’s an expensive topic.
The company is expected to make a profit of $10 billion this year alone, as per the latest forecast of earnings and costs Facebook gave for investors to read in the third-quarter earnings report. Zuckerberg told later analysts that the $10 billion number during a conference call is likely to increase in the coming years.
To Zuckerberg, the metaverse, an innovative Silicon Valley concept positing that the future of social media will be based on virtual reality and augmented technology, offers a way away from the company’s current issues: Facebook may be more significant than it has ever been, with over 3 billion users across the globe. However, its popularity with younger people has declined over the past ten years as well as the increasing anti-trust concern about Facebook is a sign that it can’t solve this situation by buying an exciting new competitor (as it did with Instagram and is considering taking on the same with TikTok or Snapchat). This means that Facebook has to develop an entirely new service to attract youngsters to its platform.
Zuckerberg acknowledged that Facebook’s struggles to keep its popularity among the younger demographic during that conference call. “We’re retooling our tools to make young adults our Northstar,” Zuckerberg said, however, at the same breath, acknowledging that this will come at an expense for older users. (The latter constitutes a troublesome basis of support for Facebook, as they are too old for advertisers and susceptible to sharing misinformation which has put the company in hot water.)
The price is an interesting new fact, yet Facebook has already been open about its metaverse plans. Zuckerberg is likely to tie those dreams to his company more explicitly and is considering a name change from Facebook Inc. to reflect the new metaverse mission and a new rebirth that may be announced on Thursday’s Connect conference. Facebook already offers a range of VR headsets via the Occulus brand, which it acquired in 2014 and recently launched an invite-only beta version of the platform known as Horizon Worlds that it hopes will draw in users eager to design virtual worlds and objects.
“If you’re in the metaverse, you’ll need digital clothes and digital tools and different experiences,” Zuckerberg stated to analysts. “Our goal is to help the metaverse reach a billion people and billions of dollars in commerce in the next decade.” In the process of establishing “this foundational platform will be a long road,” Zuckerberg warned, directing Wall Street to expect Reality Labs to be in the red in the years to come.
Additionally, Facebook plans to change its financial reporting structure, transforming the internal team responsible for the metaverse initiatives, Reality Labs, into an independent unit. This has two benefits should the metaverse come to fruition in the end. The separately published financials will give investors an understanding of the progress along the way. If it isn’t, Facebook will retain the chance to demonstrate the effectiveness of its apps (Facebook, WhatsApp, Instagram). The two apps being combined will make it more difficult for Facebook as well. They would be required to constantly explain the structure of the two numbers to investors, lest shareholders mistake their suspicions of a loss within the VR team for problems with Instagram and Facebook’s operations.
To oversee this world, Zuckerberg has assigned a top Facebook executive to manage the metaverse: Andrew Bosworth, a longtime Zuckerberg acquaintance. The latter has previously developed Facebook’s most popular features, such as the NewsFeed. As the chief of Reality Labs, Bosworth is currently vice president and is expected to be promoted into chief technology officer.
The metaverse has drawn attention from many more than Facebook and has been long overdue. (Sci-fi writer Neal Stephenson coined the term in 1992.) In the end, VR technology has proven difficult to market. Occulus created its first VR headsets more than ten years ago. The first versions released following their Facebook acquisition were costly but clunky and lacked the most popular apps. The competition from Samsung and Google have attempted to compete too and have refocused their headsets on smartphones that were not powerful enough to deliver a complete experience. The startup based in Florida Magic Leap has raised $4 billion over the past nine years, yet it has released only one prototype of its headset, which failed. In addition, while Facebook has filed more than 1500 and VR-related patents Samsung, Microsoft and Sony have nearly 2,000 patents each.
Zuckerberg seems undeterred with Facebook earning approximately $30 billion in annual profits to finance the metaverse’s expansion. “We believe that the metaverse is going to be the successor to the internet of things mobile. We believe that it will create a vastly more economic opportunity for creativity than is available in the present,” he said Monday in announcing “an essential pillar for our business over the next ten years.” It’s a pillar that he might feel that there is no other choice than to create.