Meta, the parent company of Facebook and Instagram, reported significant losses for the third quarter of 2022. On October 26, Meta announced that its metaverse division, Reality Labs, lost over $3.67 billion. In Q2 of this year, the company lost $2.8 billion.
Dave Wehner, the tech giant’s outgoing chief financial officer, commented that Reality Labs was expecting more losses in 2023 and beyond. The most recent financial reports demonstrate that Mark Zuckerberg’s huge fiscal gamble on the metaverse has not paid off.
The CEO admitted that his company was facing “near-term challenges on revenue.”
The third quarter saw a major slowdown in ad spending. Meta also fell short of Wall Street expectations with its sizeable investments into the metaverse. While Facebook daily users climbed from 1.968 billion per day to 1.984, this had little effect on profits.
Meta’s social media apps are facing formidable competition from TikTok, and it is starting to show on paper. Yet the company’s Reels feature is attracting 140 billion views a day on Instagram and Facebook. This is a 50% increase over views just six months ago.
The Q3 losses were 52% less than Wall Street projections. Meta has projected a fourth-quarter loss of 3.5%-11% lower than its 2021 revenues for the same timeframe.
Though Meta did bring in $28 billion for Q3, Zuckerberg called this number “behind where I think we should be.” This was accompanied by suggestions that jobs will be trimmed, and teams will be kept at a small number to prepare for slower times.
Zuckerberg estimates Meta will be the same size or even smaller by the end of 2023 as it is today. Yet one project is still on track to launch next year: the next-gen Quest headset called the Meta Quest 3. The ambitious Meta chief calls this development “a massive undertaking” and deems the work as having “historic importance.”
Brad Gerstner, a Meta investor with Atlimeter Capital, had a more pragmatic assessment of Meta’s current financial state. On Monday, October 24, he wrote an open letter to Zuckerberg and the board stating, “Meta has drifted into the land of excess-too many people, too many ideas, too little urgency.”
As this is not an unreasonable observation, the more important question is how does Mark Zuckerberg plan on moving Meta forward and stop bleeding money?