On Wednesday, Meta reported revenue of $28.8 billion in the three months ending June 30, a 1% slip from the same period last year. Operating income fell 32% to $8.36 billion while net income slid 36% to $6.69 billion, largely due to costs rising more than one-fifth year-on-year to over $20 billion.
Outgoing Meta chief operating officer Sheryl Sandberg tried to blunt the shock of the revenue decline by blaming at least part of it on foreign exchange fluctuations. Investors weren’t mollified, as Meta’s shares took a significant hit following the release and are now trading at less than half the value they were at when the year began.
The company’s first revenue setback followed the previous bombshell in Q4-21 that saw the Facebook platform suffer its first ever decline in daily active users (DAUs). The site managed to reverse that decline in Q2, with DAUs up a modest 3% year-on-year to 1.97 billion, although that figure was basically flat on a sequential basis.
Meta warned investors that revenue would likely decline further in Q3, due to a confluence of factors including the overall gloomy economic outlook, Apple’s decision to allow iPhone users to opt-out of ad-tracking, plus younger users viewing Facebook as dead, uncool and are flocking to competitors such as TikTok.
Meta has scaled down its hiring plans for 2022 by around 30%, while CEO Mark Zuckerberg has gone full scorched earth on existing staff, saying the company would be “turning up the heat a little bit” in terms of expectations of employee performance. Zuck told staff his plan is that “some of you might decide that this place isn’t for you, and that self-selection is OK with me.”
Lose billions, make trillions?
Meta’s Reality Labs division, the vanguard of Zuckerberg’s big bet on a Metaverse of his own design, contributed $2.8 billion of red ink to Meta’s Q2, a slight improvement on the $2.96 billion the division lost in Q1. Reality Labs’ revenue came in at $452 million, 50% better than the same period last year but down 35% sequentially and barely half the sum the division generated in Q4-21.
Despite the continuing hit to its bottom line, Meta doesn’t plan to slow its Metaverse investment. Hiring to support Reality Labs was cited for much of the 43% rise in Meta’s R&D costs but CFO David Wehner said one of the company’s “key priorities is clearly the effort that we have behind the Metaverse and Reality Labs. So it remains an area in which we are going to be increasing investment.”
Zuckerberg told analysts that the AR/VR/XR platforms that Meta was helping to build “will unlock hundreds of billions of dollars, if not trillions, over time … as the Metaverse becomes more important in every part of how we live – from our social platforms and entertainment, to work and education and commerce – I’m confident that we’re going to be glad that we played an important role in building this.”
Zuckerberg said Meta’s social media VR platform Horizons will launch a web version later this year, while the company just launched “our avatar store with digital clothes from leading fashion houses.” Zuckerberg said “how you express yourself and interact in the Metaverse, as well as the commerce around that” would be a key area of focus for Meta.
The federal empire strikes back
Meta said Reality Labs’ revenue gain was “primarily” driven by sales of the Quest 2 VR headsets. Meta surprised users this week by announcing that Quest 2’s price would go up $100 in August due to the rising costs of production and shipping. That’s a one-third hike in the cost of Quest 2’s base model, a one-quarter hike for the headset with twice the onboard storage.
Users are already crying foul, given that the devices don’t contain any tech upgrades—users will get one free game, huzzah—but the company has been selling Quest 2’s at a loss in the hopes of spurring mass adoption. Analysts are wondering if the price hike might indicate that Meta might not meet its planned timeline to deliver its Project Cambria (aka ‘Quest Pro’) high-end VR system for business professionals later this year.
Meta/Facebook is notorious for using its enormous cash reserves to simply buy up competitors—including Instagram, WhatsApp and Oculus, the company that originally developed Meta’s headsets—when efforts to develop their own in-house technology prove either inadequate or just plain inept.
With Meta dominating the existing VR headset market, U.S. regulators appear to have had enough. On Wednesday, the Federal Trade Commission sought to block Meta’s planned $400 million acquisition of VR app creator Within Unlimited (makers of fitness app Supernatural). FTC Bureau of Competition Deputy Director John Newman said “instead of competing on the merits, Meta is trying to buy its way to the top … This is an illegal acquisition, and we will pursue all appropriate relief.”
Oh, right… payments
There is an even more fundamental flaw in Zuckerberg’s plan to dominate alternate realities, namely, that his Metaverse will require a digital payment mechanism that promises ultra-low fees for the massive volumes of individual charges that users will incur as they navigate through his alternate reality. Given that all the variations of proprietary Zuck Bucks have crapped the bed, what token will serve this purpose? BTC? ETH? XRP? No? How about we just cram those big stone wheels of Yap into Meta’s headsets and be done with it?
Meanwhile, a more plausible alternative to Meta’s plans is already here, thanks in part to the infinitely scalable BSV blockchain. Transmira’s Omniscape XR platform has been turning heads for a while now with its vision of “everything, everywhere connected,” including 3D digital twins of live locations that are linked to their real-world counterparts with real-world monetization schemes. Plus, you know, there’s less chance of running into Zuckerberg’s avatar.
All of which helps to explain why Zuckerberg chose to add Meta’s name to the Crypto Open Patent Alliance (COPA) in February. COPA is the rogues’ gallery of companies fearful (with good reason) that their plans to dominate Web3 commerce will come to naught due to Bitcoin creator Dr. Craig Wright having had the sense to file patents on his work.
Zuckerberg’s M.O. has always been a case of ‘if you can’t beat ‘em, buy ‘em.’ But if you can’t beat ‘em or buy ‘em, well, MetaZuck best check his avatar store to see if those leading fashion houses make a clown costume.
Watch: BSV Global Blockchain Convention presentation, Masters of the Metaverse
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