For Facebook, It’s Metaverse Or Bust
Wednesday’s earnings results make the future the present.
After Meta (Facebook) missed on earnings, lost some users, and dropped more than $200 billion in market cap this week, analysts and journalists focused on the pivot. The company had poured billions into ‘Reality Labs’ — its division working to combine virtual reality, augmented reality, and 2D screens into a vague concept called the ‘metaverse’ — and that had come at a cost. “Meta spent $10 billion on the metaverse in 2021,” The New York Times wrote, “dragging down profit.”
Now, the inevitable calls are coming for Meta to focus on its legacy business and deprioritize its abstract future. “They made a classic strategic error in changing the name of the company to a thing that is not even in existence yet,” Ritholtz Wealth CEO Josh Brown said Thursday. But counter to the narrative, the company’s poor earnings results show it should do just the opposite.
Meta’s legacy Facebook business has hit a ceiling. Facebook’s daily active user count dropped in the fourth quarter of 2021 and it fell short on monthly active user expectations as well. The company expects to bring in less revenue than anticipated in the first quarter this year, and it faces growing threats from Apple, TikTok, and regulators. This is not a business you want to…
