Facebook became Meta a year ago. His metaverse dream seems more distant than ever

CNN business

Even by Facebook’s standards, 2021 was a tough year.

A series of damning reports based on information leaks by whistleblowers have raised uncomfortable questions about Facebook’s impact on society; the company continued to be shaken by concerns about its platform used to stage the Capitol uprising on January 6; and Apple’s privacy changes have threatened its core advertising business. Meanwhile, younger users have flocked to TikTok.

During a virtual reality event on October 28, 2021, CEO Mark Zuckerberg attempted to move forward. Zuckerberg announced that Facebook would change its name to Meta and would do everything possible to create a future version of the Internet called a “metaverse”, proving to everyone that the company he founded in 2004 was more than just a social company. average.

A year and billions of dollars later, the so-called metaverse still seems years away, if it ever manifests itself. And the company formerly known as Facebook remains a social media company, facing greater financial pressure than it did when it announced the change.

Meta’s Quest 2 consumer virtual reality headset, released two years ago, is popular in its class but is still a niche product overall. Its new headset, the much more expensive $ 1,500 Quest Pro, is aimed at corporate customers and probably won’t shake things up with everyday consumers. And Meta’s flagship social VR app, Horizon Worlds, might look like a ghost town (albeit a ghost town with a laser tag).

While some brands have since made measured bets on the Metaverse, including hiring “Metaverse leader,” it’s unclear whether consumers actually want to work or play, or even know what that means, a hard term to define. The metaverse generally refers to some sort of virtual world that people can walk into, as well as the idea of ​​making the Internet more ubiquitous and interconnected.

Meanwhile, Meta’s core business is shrinking amid growing competition from TikTok and a shrinking advertising industry amid fears of a looming recession. The company reported its second quarterly decline in revenue this week and saw its profits halve from the previous year. It sells more advertising but earns less, and user growth on its social media platforms is slowing. After first reaching a $ 1 trillion market cap last summer, it is now worth about a quarter, less than Home Depot.

“The business will not grow in 2022,” said Gil Luria, DA Davidson’s technology strategist. “It is expected to grow in the future, but that expectation could turn out to be optimistic.”

A bet that seemed bold a year ago now looks like borderline madness. Meta lost $ 9.4 billion in the first nine months of 2022 thanks to its metaverse efforts and expects the unit’s losses “to increase significantly year over year” in 2023. This has even prompted some of Meta’s supporters. to urge him to rethink his change of strategy. , and maybe slow it down. (It also prompted tearful “Mad Money” host Jim Cramer to apologize to viewers for trusting Meta’s management team and recommending investors to buy the stock.)

“People are confused by what the metaverse also means. If the company invested $ 1-2 billion a year in this project, this confusion might not even be a problem. You would simply do research and development in silence and the investors would focus on the core business, “Brad Gerstner, CEO of Altimeter Capital, a shareholder of Meta, wrote this week in an open letter to Zuckerberg. He urged Meta to” limit its investments in the Metaverse at no more than $ 5 billion a year with more discrete success goals and metrics. ”

The current pace of spending, he added, “is bloated and terrifying, even by Silicon Valley standards.”

Meta did not respond to requests for comment on this story.

Although the name change was only announced a year ago, Facebook’s switch to Meta took years. Zuckerberg has said in the past that this is a long-term gamble for the company, not an overnight transformation. It all started with Facebook’s purchase of Oculus VR in 2014 and in the following years the company launched a series of increasingly powerful, affordable and wearable headsets.

Meta’s latest headset, the Quest Pro, is its first attempt at combining virtual reality immersion with the real world. It can display text and fine detail in VR, track your eyes and facial features to give you a sense of connection with other people in virtual spaces, and show you a view of the world around you in full color allowing you to interact with digital objects – it all does referring to Meta’s goal of attracting more business users.

It’s very different from the Oculus Rift headset available in 2016 – it cost $ 599, but users also had to connect it to a powerful PC and use it with a sensor camera on a mount that followed the headset. At first, this headset didn’t even come with tracked hand controllers; it was initially shipped to customers with an Xbox controller and a small handheld remote.

Although headsets have greatly improved, virtual reality and augmented reality are still nascent technologies seeking purpose and popularity. The VR headset market is still small compared to, for example, an established gadget market like console video games. ABI Research predicts that 11.1 million VR headsets will be shipped this year, of which approximately 70% will be Quest 2 headsets. This figure is down from its estimate of 14.5 million headsets in 2021, of which Quest 2 headsets accounted for 85% of the total.

Some tech experts say these products have potential, even in the workplace, but in the short term, their adoption by everyday users remains uncertain at best.

“I’m not sure this will translate for end users anytime soon,” said David Lindlbauer, an assistant professor at Carnegie Mellon University who leads the school’s augmented perception lab. (Meta sponsors Lindlbauer’s research on developing advanced user interfaces for augmented reality and virtual reality.)

For Zuckerberg and Meta, this creates a unique challenge.

Zuckerberg successfully moved Facebook’s previous operations from desktop to mobile shortly after going public, a move that helped strengthen its advertising business and secure its dominance for much of the next decade. But smartphones were already ubiquitous at that time; if anything, Facebook was a bit late.

Now the company is looking to roll out a new technology and hopes consumers will follow suit.

Meta has positioned change as a kind of existential imperative for the business. After Apple’s app tracking changes damaged Meta’s ability to target ads to its users, the company doesn’t want to rely on external hardware or an app store in the future.

A visitor to the Tokyo Game Show 2022 tests the Meta Quest 2 VR headset.

But there is a big difference between looking at a computer or smartphone screen and wearing a headset. While Lindlbauer can imagine using a headset for perhaps an hour a day, alternating between immersive views of virtual reality and digital images that blend into the physical world, “I think we haven’t quite hit the spot yet for something I want to wear all day. ., “He said.

Meta also faces a huge challenge when it comes to showing VR content that users like the look of and want to use repeatedly. According to a recent Wall Street Journal report, internal documents show that Horizon Worlds has fewer than 200,000 monthly active users, a rounding error for a company with 3.7 billion monthly active users across its various services. (A spokesperson for Meta told the Journal that it’s “easy to be cynical about the Metaverse” but Meta thinks it’s “the future of computing.”)

“They are starting with the idea of ​​wanting to build a big space like Horizon Worlds where everyone will show up and start building things,” said Avi Bar-Zeev, founder of the AR and VR consulting firm RealityPrime and a former employee. at Apple, Amazon and Microsoft, where he worked on the HoloLens VR headset. “No virtual world has ever managed to create a canvas that people enter and start painting.”

Zuckerberg personally received intense criticism for how Meta views work and play interactions in virtual spaces after posting an image of his cartoon-like avatar in Horizon Worlds on Facebook, an image he later admitted. be “simple enough”.

“When it comes to fast-shrinking audiences, give me more, the progress we’ve seen so far is disappointing,” said Janna Anderson, director of Elon University’s Imaging the Internet Center. “Meta suffers tremendous ridicule on social media and in the minds of the general public.”

Quest Pro’s face tracking capabilities can help make avatar facial expressions more realistic – initially, users can access this tracking in Horizon Worlds and Horizon Workrooms, Meta said, as well as in several developer apps such as Painting VR and DJ app. Tribe XR.

But even with face detection, what users see when they enter Horizon Worlds – human-like block avatars that exist only with their torso up, floating around a virtual square – will continue for the rest of the world. This moment is in stark contrast to the image painted by Zuckerberg during the Meta’s Connect event on October 11 of the complete avatar of him.

Meanwhile, investors seem fed up with investing in the Metaverse at a time when even the future of its core business is deeply uncertain.

“I think I sum up what investors are feeling right now is that there are too many experimental bets compared to proven core bets,” Jeffries analyst Brent Thill said during Meta’s earnings call this week.

For his part, Zuckerberg defends the change of strategy. “I would say there is a difference between something that is experimental and not knowing how good it will be,” he replied. Separately, he added: “I think people will look back decades and talk about the importance of the work that has been done here.”

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