Meta lost $13.7 billion on Reality Labs in 2022 as Zuckerberg’s metaverse bet gets pricier
Mark Zuckerberg, chief executive officer of Meta Platforms Inc., demonstrates the Meta Quest Pro during the virtual Meta Connect event in New York, US, on Tuesday, Oct. 11, 2022.
Michael Nagle | Bloomberg | Getty Images
Mark Zuckerberg’s dream of a future in the metaverse is costing investors a boatload of money.
In its earnings report after the bell on Wednesday, Meta said its Reality Labs division, home to the company’s virtual reality technologies and projects, posted a $4.28 billion operating loss in the fourth quarter, bringing its total for 2022 to $13.72 billion.
related investing news
It was a tough first full year for the new Meta, the company formerly known as Facebook. In late 2021, Zuckerberg changed the company’s name and said its future would be in the metaverse, a digital universe where people will work, shop, play and learn.
But for now, it’s just a cost center, and Meta is still an online ad company.
Reality Labs generated $727 million in the fourth quarter, and $2.16 billion in revenue for all of 2022 — a decline from $2.27 billion in 2021 — including sales of Quest headsets. In other words, the division lost more than six times the amount of money it generated in revenue last year, while accounting for less than 2% of total sales at Meta.
Analysts were expecting Reality Labs to record an quarterly operating loss of $4.36 billion on revenue of $715.1 million, according to StreetAccount.
Sales of VR headsets in the U.S. declined 2% in 2022 from the prior year as of early December, according to data shared with CNBC by research firm NPD Group.
In July, Meta announced it was raising the price of its Quest 2 VR headset by $100. The company said at the time that the price hike was necessary to account for inflationary pressures. Meta then debuted its more expensive Quest Pro VR headset in October, pitching it to companies as an enterprise-workplace device for $1,500. This week, Meta is running a sale on its high-end VR headset, shaving off $400 for a limited time.
Zuckerberg told CNBC’s Jim Cramer last summer that he hopes to “get to around a billion people in the metaverse doing hundreds of dollars of commerce” by the second half of the decade.
But before the Facebook founder’s dreams become a reality, Meta has to spend many billions of dollars developing the VR and augmented-reality technologies that underpin the metaverse concept.
The company said last year that it expects “Reality Labs operating losses in 2023 will grow significantly year-over-year.”
“Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run,” Meta said at the time.
Shareholders have been less than thrilled with the results so far. Meta lost almost two-thirds of its value last year as metaverse costs soared and the company’s core online ad business suffered from a struggling economy, increased competition from TikTok and Apple’s privacy update, limiting ad targeting.
The company on Wednesday reported fourth-quarter results that beat analysts’ revenue estimates and announced a $40 billion buyback, sending the stock up more than 17% in extended trading.
WATCH: Snap lower guidance symbolic of overall economic caution and headwinds
Tik Tok creators gather before a press conference to voice their opposition to the “Protecting Americans from Foreign Adversary Controlled Applications Act,” pending crackdown legislation on TikTok in the House of Representatives, on Capitol Hill in Washington, U.S., March 12, 2024.
Craig Hudson | Reuters
The Supreme Court on Friday will hear oral arguments in the case involving the future of TikTok in the U.S., which could ban the popular app as soon as next week.
The justices will consider whether the Protecting Americans from Foreign Adversary Controlled Applications Act, the law that targets TikTok’s ban and imposes harsh civil penalties for app “entities” that continue to carry the service after Jan.19, violates the U.S. Constitution’s free speech protections.
It’s unclear when the court will hand down a decision, and if China’s ByteDance continues to refuse to divest TikTok to an American company, it faces a complete ban nationwide.
What will change about the user experience?
The roughly 115 million U.S. TikTok monthly active users could face a range of scenarios depending on when the Supreme Court hands down a decision.
If no word comes before the law takes effect on Jan. 19 and the ban goes through, it’s possible that users would still be able to post or engage with the app if they already have it downloaded. However, those users would likely be unable to update or redownload the app after that date, multiple legal experts said.
Thousands of short-form video creators who generate income from TikTok through ad revenue, paid partnerships, merchandise and more will likely need to transition their businesses to other platforms, like YouTube or Instagram.
“Shutting down TikTok, even for a single day, would be a big deal, not just for people who create content on TikTok, but everyone who shares or views content,” said George Wang, a staff attorney at the Knight First Amendment Institute who helped write the institute’s amicus briefs on the case.
“It sets a really dangerous precedent for how we regulate speech online,” Wang said.
Who supports and opposes the ban?
Dozens of high-profile amicus briefs from organizations, members of Congress and President-elect Donald Trump were filed supporting both the government and ByteDance.
The government, led by Attorney General Merrick Garland, alleges that until ByteDance divests TikTok, the app remains a “powerful tool for espionage” and a “potent weapon for covert influence operations.”
Trump’s brief did not voice support for either side, but it did ask the court to oppose banning the platform and allow him to find a political resolution that allows the service to continue while addressing national security concerns.
The short-form video app played a notable role in both Trump and Democratic nominee Kamala Harris’ presidential campaigns in 2024, and it’s one of the most common news sources for younger voters.
In a September Truth Social post, Trump wrote in all caps Americans who want to save TikTok should vote for him. The post was quoted in his amicus brief.
What comes next?
It’s unclear when the Supreme Court will issue its ruling, but the case’s expedited hearing has some predicting that the court could issue a quick ruling.
The case will have “enormous implications” since TikTok’s user base in the U.S. is so large, said Erwin Chemerinsky, dean of Berkeley Law.
“It’s unprecedented for the government to prohibit platforms for speech, especially one so many people use,” Chemerinsky said. “Ultimately, this is a tension between free speech issues on the one hand and claims of national security on the other.”
WATCH: It appears TikTok could really get shut down, says Jim Cramer
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports9 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway