Mark Zuckerberg wants his staff to know he hasn’t forgotten how to make money.
The CEO, who’s spent most of the past 12 months burning billions of dollars to transform his empire into a metaverse company in the coming years, slightly reversed course this week and said WhatsApp, not avatar land, would likely drive sales growth in the coming years. The comments made to Meta employees during a company-wide meeting first reported by Reuters, come weeks after a round of mass layoffs impacting 11,000 employees at the company rattled workers and investors alike.
Zuckerberg responded to employee questions saying business messaging in WhatsApp and Messenger were, “probably going to be the next major pillar of our business.” Monetization on those two apps compared to the more mature Facebook and Instagram apps, he said, is still in a relatively early stage. WhatsApp alone is by far the world’s most used messaging app with an estimated $2 billion users in 2020. Though WhatsApp’s previous owners reportedly had a mantra of, “No ads, no games, and no gimmicks,” Meta has spent years toying with ways to slowly integrate advertising through the platform in the coming years.
At the same time, Zuckerberg appeared to try and downplay the massive bet the farm investment he’s making into metaverse products. When asked about the company’s expenditures, Zuckerberg reportedly said employees were the largest expense, followed mainly by infrastructure support for its family of ads. Oh, and yeah 20% of the company’s spending went towards Reality Labs, the segment in overseeing its metaverse ambitions. 40% of Reality Labs’ budget goes towards virtual reality products while another 10% went towards metaverse-like social platforms, Zuckerberg reportedly said.
Meta did not immediately respond to Gizmodo’s request for comment.
Although Zuckerberg isn’t giving up on the metaverse by any stretch of the imagination, the recent comments suggest he’s beginning to take employee and shareholder criticism of the company’s recent business strategy at least somewhat seriously.
Meta’s Reality Labs segment has already lost $9.4 billion this year alone. Making Revenues in Reality Labs also declined by nearly 50% year over year during the third quarter despite Meta owning the Quest 2 which is easily the world’s top selling consumer VR headset. However, rather than tighten their belts in the face of shakier VR sales this year, Zuck and his team instead opted to release a glitzy but mostly useless, eyeball tracking $1,500 mixed reality headsets. And more metaverse-related operating losses are likely around the corner.
“We do anticipate that Reality Labs operating losses in 2023 will grow significantly year-over-year,” Meta said in a statement to CNBC following its third quarter earnings. “Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”
Meta investors appear increasingly annoyed at the prospect of some long term bets without certain payoffs. As of early November, the company’s stock price had plummeted by more than 72% from January when Zuckerberg reaffirmed the company’s metaverse commitments.
“If any other company had done this you’d have activist investors writing letters, proposing alternative slates of directors, demanding change,” AllianceBernstein chief funding officer for U.S. development Jim Tierney reportedly told The Financial Times earlier this year. AllianceBernstein is a Meta shareholder. “I think Mark heard crystal clear what investors wanted. He’s made his decision.”
But hey, at least metaverse avatars have legs now! Sort of.