Out of all the tech giants, Meta is one of the most criticised companies. Some of it with good reasons! From Cambridge Analytica to whistleblower Frances Haugen, Meta is not a stranger to crisis mode. But the recent blows were self inflicted, and they affect the company’s future growth plan: the Metaverse. What happened, how did Meta respond and what will the impact be on the future of Meta’s Metaverse plans?
Disclaimer: I’m not a stock market analyst and this is not commentary on the performance of Meta in the public market. This posts comes from my interest as a private company investor in the metaverse space at Remagine Ventures. I invite you to read my previous posts: “Investing in the pillars of the Metaverse” and “The top 10 companies investing billions in the Metaverse“.
Facebook’s name change to Meta in October 2021was a strong statement: Facebook will become a fully focused on the metaverse within 5 years. The vision was presented with videos demonstrating what you’ll be able to do in the Metaverse. Some of you might recall Mark practicing fencing with a digital hologram looking character.
The company backed its vision with multi billion dollar investment – $10.2 billion to date according to reports and approximately $4 billion spent in Q2 2022 alone according to the company’s recent filings.
A report by The Information unveiled that Meta was planning to release 4 new virtual reality headsets by 2024. Already the owners of Meta Quest II (f.k.a Oculus Quest), the company owned the first first mass market VR headset and seem to be charging ahead with innovation.
The cracks begin to show
But at some point, which seems to have accelerated in Q2 2022 the cracks started to show across the board (partly as a result as the macro environment, which hit the public markets and access to capital)
- In 2021, Apple made privacy changes that hampered Meta’s ability to target and measure advertising, Meta’s stock took a hit
- In Q2 2022 Meta reported a decline in revenue for the first time in its history, and a 36% profit decline – further declines in the stock
- On a June 30th call, Mark Zuckerberg said that employees should prepare for an ‘intense period’ and added: “Realistically, there are probably a bunch of people at the company who shouldn’t be here. and part of my hope by raising expectations and having more aggressive goals, and just kind of turning up the heat a little bit, is that I think some of you might just say that this place isn’t for you. And that self-selection is okay with me.”
- A number of key execs departed including COO, CTO and others…
- With the rise of TikTok and BeReal, Facebook is losing its grip in the top 10 social apps
- Meta raised the price of its two-year-old Quest 2 by $100 citing rising costs
It didn’t help that people like Vitalik Buterin, the creator of Ethereum said that Meta’s efforts in this space are likely to misfire:
The flop announcement
Taking in context all of the above, the product announcement a year ago was relatively tame. It was supposed to be a light, positive announcement: Horizon Worlds, the company’s virtual world product that lets users create their own VR environments, was set to launch in France and Spain.
Seemingly a reason to celebrate, but the post came with a very simple looking virtual ‘selfie’ of Mark, that resembled Roblox or RecRoom, and didn’t reflect much progress since the fanfare demos last year.
The picture and drew heavy criticism for being simplistic and expressionless. It also put a bigger doubt on the company’s future Metaverse plans.
There are plenty of examples of product launches that don’t go according to plan. But this came in a bad timing for Meta and casts a shadow on the company’s wider plans.
The call for an ‘open metaverse’ and decentralisation puts the company in a precarious position. It wants to lead/win but needs to collaborate with a wide group of stakeholders and not dominate too much. Nick Clegg, the former co-prime minister of the UK and Meta’s President of Global Affairs, published a long manifesto repeating how Meta’s Metaverse will work:
Nobody wants big tech companies to plow ahead without thought for the impact of their advances on society, nor do they want them to do all the thinking themselves behind closed doors.
Nick Clegg, Meta’s President of Global Affairs
My take – don’t throw the baby with the bath water
Earlier this week, Meta released another update, showing improved graphics and said that ‘major updates’ are coming to Horizon Worlds soon:
“Also, I know the photo I posted earlier this week was pretty basic — it was taken very quickly to celebrate a launch. The graphics in Horizon are capable of much more — even on headsets — and Horizon is improving very quickly.”
Mark Zuckerberg, Meta’s founder and CEO
The potential for the Metaverse remains huge. Zuckerberg commented on the Metaverse economic potential to CNBC’s Jim Cramer:
“We hope to basically get to around a billion people in the metaverse doing hundreds of dollars of commerce, each buying digital goods, digital content, different things to express themselves, so whether that’s clothing for their avatar or different digital goods for their virtual home or things to decorate their virtual conference room, utilities to be able to be more productive in virtual and augmented reality and across the metaverse overall”
Mark Zuckerberg, CEO of Meta
Sure, it’s still vague, but the reports about the multi trillion dollar commerce potential in the future metaverse continue to mount up, and Meta is positioned to be one of the key players in this space.
Meta is one of the few companies that has a user base of 2 billion. This release showed that the bar with consumers is high, but nevertheless they are innovating in relatively new territory.
Historically, innovation was always received with skepticism and sometimes ridiculed. For example, in 1998, Prof. Paul Krugman, a Noble Prize winning economist, predicted that by 2005 it will become clear that the Internet’s impact on the economy will be no greater than the Fax machine…
We are still in a very early stage of the development of the so-called Metaverse and I expect the hardware, the graphics, the user experience and functionality offered to users will develop exponentially as we progress.
This backlash shows that despite the power of the platforms, users feedback matters. For Meta, things may get even worse before they get better, but I’m far from writing it off. As a founder told me this week: winter is the best time to build and Meta still has a lot of cash and is determined to be a major player in this space in the coming years.