The Metaverse is Mark Zuckerberg’s biggest bet yet. Driven by the dwindling popularity and profitability of his previous platforms, the Meta CEO is going all in. He’s betting nothing less than the future of his company on virtual reality. Part five in a series on the tech giant’s problems.
If you missed the last episode, you can find it here:
OK Mark, you have my attention
Wall Street doesn’t believe in the Metaverse
An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards.
Brad Gerstner, CEO of Altimeter, October 2022
[…]I think people are going to look back on decades from now and talk about the importance of the work that was done here.
Mark Zuckerberg in October 2022
Zuckerberg is tightening his belt
Meta’s CEO sees no other path but forward. At the moment, Facebook and Instagram are still bringing in plenty of money. But they’ve passed their zenith and are at the mercy of hardware manufacturers such as Apple. Sooner or later, Meta will have to replace its old platforms with something new. And Zuckerberg is convinced that virtual reality will be his salvation – not least because he has a chance to control the hardware there as well.
Too much, too soon, too shaky a foundation
Whether this gigantic bet will pay off depends on three factors:
Are virtual reality (VR), mixed reality (MR) and augmented reality (AR) gaining mainstream acceptance as technologies?
Do Meta’s legacy platforms have enough staying power to fund the «Reality Labs» until the Metaverse becomes profitable?
Can Meta hold its own in the VR business against powerful competitors such as Apple?
We can only speculate. But I’ll venture a guess at this point:
Move fast and break yourself
Header image: Picture: Keystone / Andrew Caballero-Reynolds
My fingerprint often changes so drastically that my MacBook doesn't recognise it anymore. The reason? If I'm not clinging to a monitor or camera, I'm probably clinging to a rockface by the tips of my fingers.
Sun Microsystems. Doesn’t ring a bell? You’re not alone. Yet Sun was a $200 billion tech giant in its prime. Then the company missed the boat. In 2009, it was finally acquired by Oracle for a ridiculously minuscule price. Today, no one remembers Sun. The former corporate campus in California now acts as Meta’s headquarters. But when Mark Zuckerberg moved in in 2012, he didn’t remove the old sign with the Sun logo. Instead, he simply flipped it over and slapped his Facebook emblem on the front – as a cautionary reminder of how quickly luck can turn in Silicon Valley.
When he moved in in 2012, Mark Zuckerberg simply flipped around Sun Microsystems’ corporate sign. Source: Shutterstock
That was ten years ago. Today, Zuckerberg is fighting tooth and nail to keep Meta from becoming the next Sun. I’ve highlighted Meta’s various problems throughout this series: Facebook’s lack of coolness, Instagram’s vanishing roots, the Chinese threat, and a War with Apple. This fifth and final part is about Zuckerberg’s biggest bet yet, the Metaverse. And nothing less than the future of his corporation is at stake. All or nothing.
Background information
Meta under pressure – Part 4: the Apple Menace
by Samuel Buchmann
I sit in my spacious 80-square-foot office overlooking a mountain lake. I’m typing these lines on my usual Logitech MX Keys. A large curved screen floats in the air in front of me – at a comfortable distance. On it you can see the user interface of my MacBook, with all my programs and files. With a gesture, I can switch between my computer and a meeting using a floating console on the table. I feel like Tom Cruise in Minority Report.
This whole scene isn’t taking place in our physical realm, but in virtual reality. I’ve equipped the Quest Pro, Meta’s newest headset. It’s meant to usher in a new era in how we interact with technology. Unlike most other headsets, the Quest Pro doesn’t just send me into completely virtual worlds. When I switch to mixed reality, cameras film the physical world around me and project it back into the headset in real time. I can swap my office at the mountain lake for my real room, where virtual screens now float. This blending of two realities is impressive – the virtual elements remain completely stationary because the Quest Pro tracks my movement. Nothing flickers or wobbles. The cameras even track my facial expressions. In virtual meetings, my comic avatar looks where I look in the physical world. When I smile, he smiles too.
Meta’s new Quest Pro headset feels futuristic with its mixed reality mode.
The technology isn’t yet fully developed. Resolution, refresh rate and the quality of the passthrough cameras aren’t solid enough for this. The ecosystem of apps is also tiny so far. So putting games aside, the Meta Quest Pro has little practical use, and is primarily an overpriced showcase for Meta’s concept. But even accepting all the scepticism about the current state of the art and the Metaverse: I’m impressed, without even wanting to be. It’s a delightfully futuristic experience to navigate virtual and mixed worlds. For the first time, I am beginning to understand Mark Zuckerberg’s vision.
Meta’s CEO is putting more money into the development of virtual, mixed and augmented reality than anyone else. The company sank around ten billion into the Metaverse in 2022. An absurd amount, even for one of the largest tech companies in the world. The added name change at the end of 2021 from Facebook to Meta is significant: Zuckerberg is firmly convinced that one day we will spend a lot of time in the Metaverse and consume advertising on the side – just like users do today on Facebook and Instagram. It remains unclear how long this will take; Zuckerberg is talking about five to ten years.
Wall Street doesn’t like this prediction. Not one bit. Compared to its peak of $378 in September 2021, Meta’s stock has plunged more than 70 per cent. Today a share is traded somewhere around $100. This despite the fact that the tech giant is still highly profitable. Many investors don’t believe in Zuckerberg’s vision of the future. Brad Gerstner, CEO of investment fund Altimeter, put it this way in an open letter: «An estimated $100B+ investment in an unknown future is super-sized and terrifying, even by Silicon Valley standards,» calling for Meta to instead refocus on its core business and artificial intelligence development. In general, he claims the company’s become too bloated and needs to become more efficient.
The problem with open letters like these: at most, they’re symbolic. Mark Zuckerberg holds the majority of voting rights in his company. He alone can determine Meta’s course – for better or worse. Every year, the Board of Directors tries to limit Zuckerberg’s influence. Every year, he alone outvotes all others and the matter is settled. At least he addressed Wall Street’s concerns regarding the Metaverse in an October earnings call: «[…]I get that a lot of people might disagree with this investment. […]But over time, I think that these are going to end up being very important investments for the future of our business. […]I think people are going to look back on decades from now and talk about the importance of the work that was done here.» No chance of changing his mind.
Still, Zuckerberg doesn’t seem entirely unaffected by the staggering drop in share price. At the beginning of November, he announced far-reaching cost-cutting measures: 11,000 employees would lose their jobs – that’s 13 per cent of the company’s total workforce. It’s one of the largest waves of layoffs in Silicon Valley history. The fact that it only caused a muted outcry came down to Meta’s clever communication strategy. Zuckerberg didn’t look for excuses, but took responsibility. Employees affected received generous severance payments, ongoing health insurance for six months and assistance in finding a job. This is in stark contrast to Twitter, where Elon Musk publicly denigrates his developers, firing them with impersonal emails or even tweets. In comparison, Meta’s approach seems more considered and respectful.
Mark Zuckerberg in 2021 at a presentation in the Metaverse. Source: Screenshot, Meta presentation
But if you think Mark Zuckerberg has folded and is now investing less in the Metaverse, you’re mistaken: the «Reality Labs» department, responsible its development, was seemingly spared from layoffs for the most part. Other divisions weren’t so lucky: the countless headhunters who recruited new engineers during COVID had become obsolete. The unsuccessful video call display «Portal» was canned. Other hardware projects such as two Meta-owned smartwatches were also cancelled. It seems the layoffs aren’t a move away from virtual reality, but an attempt to focus the company on it. Meta is expected to become «leaner and more efficient» according to Zuckerberg, focusing its resources on a few areas such as advertising, artificial intelligence and the Metaverse.
VR and MR technology is fascinating. Once headsets become lighter and higher resolution, I can imagine myself using them regularly. The concept of AR is also captivating – glasses through which you can see the physical world around you unobstructed, enriched with virtual elements. Meta is researching both and believes that VR, MR and AR will eventually merge into one device. In addition to hardware, an ecosystem of software is also needed, which is currently still near-nonexistent. Content moderation in virtual worlds is yet another matter – harassment and insults take on a whole new dimension in the Metaverse. Just like in our physical realm, there need to be laws, control mechanisms and consequences for problematic behaviour. The road to achieving all this seems long to me. Very long.
Too long. Just one year after Facebook was renamed Meta, the company is already under massive pressure. Zuckerberg must have expected pushback when he announced the huge investment in his Metaverse. But he probably didn’t expect the value of his company to plummet by more than 70 per cent on the stock market. If he ever needs more capital in future, it could prove difficult to acquire. While the popularity of Facebook and Instagram is falling, advertising revenue from both platforms is simultaneously declining. Additionally, Meta is struggling with Apple’s App Tracking Transparency and growing competition from TikTok. As a result, I don’t think Zuckerberg can burn the cash necessary to make VR, MR, and AR profitable for long enough. Especially since development is only progressing slowly. The Quest Pro isn’t a revolution compared to the two-year-old Quest 2. The Horizon Worlds virtual social media platform has so many bugs that Meta needs to force its own employees to use it.
This is roughly what the upcoming Apple headset is rumoured to look like. Source: Ian Zelbo
And then there’s the other looming threat: Apple is rumoured to launch its own MR headset in 2023. CEO Tim Cook sees great potential in the technology, but is more cautious than Mark Zuckerberg. «I’m not sure the average person even knows what the Metaverse is,» he said recently. I think Apple’s strategy will work out better than Meta’s. Instead of mindlessly going all-in, Tim Cook has built a stable foundation and better positioned his company when it comes to data protection. Customer trust is particularly important in virtual reality. I regularly need to grant camera and microphone access to apps in my Meta Quest Pro headset. I don’t feel comfortable with the thought of Meta managing this data – the company isn’t exactly known for respecting privacy in the past. If there were an alternative from Apple, I’d prefer that one.
I could, of course, be wrong in my assessment. Perhaps Mark Zuckerberg will manage to establish his Metaverse and outdo the competition, despite all the critics. He’s used to scepticism; hardly anyone believed in Facebook at first. However, it’s precisely this success that also makes him blind to legitimate doubts regarding his vision of the future. The Meta-CEO seems to live in his very own virtual reality where there’s no room for criticism. He’s obsessed with the idea of creating and dominating the next evolution of the Internet.
I wonder if ten years from now the Meta sign will still be at 1 Hacker Way. Source: Shutterstock
Zuckerberg’s blind zeal is dangerous. Either for society, if Meta succeeds. I shudder to think that virtual reality could be in the hands of a single man – a technology that invades people’s privacy far deeper than any before it. On the other hand, Meta really could go down if the bet doesn’t work out. It’s a big risk, investing so much money into new technology at such an early stage. In the end, Mark Zuckerberg could become a martyr. A driving force sacrificing his own company to advance VR, MR and AR – only to be eventually overtaken by other companies such as Apple. The reckless motto «Move fast and break things» could ultimately break Meta’s own neck. One thing’s for sure: I’ll be making a pilgrimage to Palo Alto in ten years to see if anyone has flipped the Meta sign on Hacker Way.
