Mark Zuckerberg shows his unwavering commitment as he believes this project will undoubtedly be highly expensive in the next years.
Reality Labs, the part of Meta that specializes in virtual reality (VR) and the metaverse, has reported losses for the seventh consecutive quarter, but CEO Mark Zuckerberg is unwavering in his commitment to investing in the field, which he refers to as a “huge potential.”
Zuckerberg noted that such losses would persist for a number of years before VR apps and its Metaverse platform are developed sufficiently to take advantage of the “huge potential” worth “hundreds of billions of dollars” during Meta’s Q2 earnings call on July 27.
“The Metaverse is a massive opportunity for a number of reasons. I feel even more strongly now that developing these platforms will unlock hundreds of billions of dollars, if not, trillions over time.”
“This is obviously a very expensive undertaking over the next several years,” Zuckerberg added, “I’m confident that we’re going to be glad that we played an important role in building this.”
In Meta’s Q2 financial announcement earlier in the day, it was made clear that Reality Labs had been experiencing a prolonged period of operational losses. For divisions in the research and development stage, such losses are common.
In order to integrate Meta users using its numerous social platforms, such as the Metaverse, with the Oculus range of VR headsets, Reality Labs creates VR and augmented reality (AR) apps.
In addition to the losses, Reality Lab’s revenue and operating margin have also been heading downward since 2021 and 2020, respectively. The Q2 2022 sales of $11.1 billion and the margin of 29 percent reported were the lowest in the previous seven quarters.
A “difficult macro climate,” according to Zuckerberg, may be making the losses worse.
He said that the current state of the economy is worse than it was a quarter ago, and his assertion is supported by the fact that the Federal Reserve increased interest rates on July 27—the day before the Meta earnings call—by 0.75 percentage points for the second time in a row. He continued:
“We seem to have entered an economic downturn that will have a broad impact on the digital advertising business. In this environment, we’re focused on making a long term investment that will position us to come out stronger.”
Despite the financial difficulties, Zuckerberg is optimistic that his business will emerge from the present recession as “a stronger and more disciplined organization.”
He credited this assurance to the investments his business is making right now to make sure it can continue to be a leader in a sector that could be changing to make room for new Metaverse platforms.
In the meantime, Meta is being sued by the Federal Trade Commission (FTC), which claims that the company wants to control the whole Metaverse market. According to the lawsuit, Meta’s actions in the area stifle innovation and “competitive competition” among US-based businesses seeking to develop platforms and apps for the Metaverse.
