The company — which owns Facebook, Instagram and WhatsApp — is facing stiff competition from TikTok as it competes to attract younger consumers.
Meta's share price is on course for the worst day in its history after the tech giant gave a grim update on its performance in the fourth quarter of 2021 — and revealed eye-watering losses in its metaverse division.
But this wasn't the main thing that is troubling investors. Financials relating to Reality Labs — the division responsible for pursuing Mark Zuckerberg's metaverse dream — have been disclosed for the first time, and they make for very uncomfortable reading.
To make matters worse, Meta's chief financial officer David Wehner has warned that he expects operating losses will "increase meaningfully" in 2022. All of this means that there's little sign of the company's push into the metaverse becoming a cash cow, at least for now.
All of this comes as Meta — which owns Facebook, Instagram and WhatsApp — battles with rival social networks for eyeballs, and to engage with younger consumers who prefer using TikTok. All of this is having an impact on Meta's advertising revenue, which represents the lion's share of profits. Speaking to analysts on an earnings call, Zuckerberg admitted:
"People have a lot of choices for how they want to spend their time, and apps like TikTok are growing very quickly."
The Gory Details
While it could be argued that Zuckerberg's push into the metaverse is indicative of a tech giant that is refusing to sit still — and continually innovating to remain relevant and achieve consistent growth — the prospect of virtual worlds punching through into the mainstream and becoming a part of our everyday lives has been met with skepticism.
It may take Meta several years, and countless billions more dollars, to fully build its metaverse offering — and shareholders may lose patience if this continues to drag on the company's profitability. Zuckerberg is also facing stiff competition from a number of other metaverse offerings, including blockchain-based platforms such as Decentraland and The Sandbox.
The dire numbers cap off a pretty awful week for Meta.
A few days ago, it was confirmed that the Diem digital currency is being abandoned for good.