Meta had said in October that it would see a $US10 billion reduction in operating profit for the year because of investments in Reality Labs. But it’s not just branding - resources and talent within Facebook have shifted to the new focus. When Meta announced the change, the move was criticised for being a distraction from the many problems Facebook has been asked by regulators to fix with its existing networks. Wednesday’s earnings report was the company’s first since changing its corporate name from Facebook late last year. Revenue was $US33.67 billion, compared with the $US33.43 billion average estimate. Net income in the fourth quarter was $US10.3 billion, or $US3.67 a share, Meta said, falling short of the $US3.84 per share analysts projected. Now young users - the future consumers of its advertising - are choosing platforms like TikTok and Google’s YouTube for entertainment and community instead. If the advertising business can return to growth, which seems likely with the emergence of Reels, the stock should keep moving higher from here.For the better part of a decade, it has seemed like Facebook would never stop growing. The metaverse will continue to spill billions of dollars more in red ink on the income statement, but after Zuckerberg's pep talk, investors are looking at the company through rose-colored lenses. That's a sensible plan, and it doesn't overshadow Meta's high-margin digital advertising business. The company plans to grow overall profits steadily while investing in Reality Labs. He seems to have convinced investors that isn't true, and that's partly why the stock has soared. Shares fell roughly 75% in the year after the company changed its name to Meta, and part of the reason for that seemed to be investor fear that Zuckerberg would risk the entire business on his metaverse experiment. The Meta CEO may also be responding to the plunge in the stock. The struggles of the metaverse are also noticeable compared to the level of attention that ChatGPT and generative artificial intelligence have gotten recently, which seems like the kind of transformative technology that actually has practical applications. Non-fungible tokens (NFTs), a companion market, have plunged in value, and the idea that people want to spend time in virtual worlds has yet to gain salience, while public interest in the metaverse also seems to have evaporated after Zuckerberg initially made it a buzzword. The metaverse project has fallen flat thus far, not just at Meta but elsewhere as well. However, there are a number of reasons why Zuckerberg's focus seems to have returned to the core business. In fact, it released Quest Pro, its latest headset, at the end of the last year. Meta isn't giving up on the metaverse by any means. The Meta chief discussed the company's recent work in the metaverse on the earnings call but it seemed to take a back seat to Meta's other projects as he summed up the company's priorities by saying, "Alright, so those are the areas we're focused on: AI, including our discovery engine, ads, business messaging, and increasingly generative AI, and the future platforms for the metaverse." Beyond this, our management theme for 2023 is the 'Year of Efficiency' and we're focused on becoming a stronger and more nimble organization." Zuckerberg's opening statement in the earnings release also omitted any mention of Reality Labs, saying: "The progress we're making on our AI discovery engine and Reels are major drivers of this. In the report, the company noted that nearly all of its capital expenditures, which primarily go to its data centers, are for its family of apps, rather than Reality Labs. On the earnings call the company talked up its investments in artificial intelligence (AI) and cost-cutting and efficiency initiatives such as a more cost-efficient data center architecture. That's exactly what he appears to be doing here. However, like a seasoned politician, Zuckerberg seems to have learned that the best way to deal with bad news is to shift attention. In the fourth quarter, Reality Labs lost $4.3 billion, capping off a year in which it lost $13.7 billion. That move also revealed Reality Labs to be a smoldering money pit, and it's only gotten worse since then. Around that time, the company restructured its financial reporting to separate Reality Labs, the division that produces Oculus VR headsets and is focused on the metaverse, from its family of apps segment.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |