Facebook became Meta a year ago. His metaverse dream seems as distant as ever

CNN Business

Even by Facebook’s standards, 2021 has been a rough year.

A series of damning reports based on whistleblower leaks have raised uncomfortable questions about Facebook’s impact on society; The company continued to be rocked by concerns about its platform being used to stage the January 6 Capitol Riots; and Apple’s privacy changes threatened its core advertising business. Meanwhile, younger users were flocking to TikTok.

During a virtual reality event on October 28, 2021, CEO Mark Zuckerberg tried to keep up. Zuckerberg announced that Facebook will change its name to Meta and do everything it can to create a future version of the Internet called the “metaverse,” proving to everyone that the company he started in 2004 was more than a social media company.

A year and billions of dollars later, the so-called metaverse still seems years away, if it ever appears at all. And the company formerly known as Facebook remains a social media company — one facing more financial pressure than when it announced the change.

Meta’s Quest 2 consumer virtual reality headset, released two years ago, is popular in its category, but overall still a niche product. Its newest headset, the much more expensive $1,500 Quest Pro, is aimed at enterprise customers and likely won’t shake things up with everyday consumers. And Meta’s flagship social VR app, Horizon Worlds, might look like a ghost town (albeit a ghost town with a laser tag).

While some brands have since made measured bets on the Metaverse, including hiring “Metaverse leaders,” it’s unclear whether consumers want to work or play it, or even know what it means. Hard term to define. Metaverse generally refers to a kind of virtual world that people can walk around in, as well as the idea of ​​making the Internet more ubiquitous and interconnected.

Meanwhile, Meta’s core business is shrinking as it faces growing competition from TikTok and a shrinking advertising industry amid fears of an impending recession. The company reported its second quarterly drop in revenue this week and saw its profits halve from a year earlier. It sells more ads but makes less money, and user growth on its social media platforms is slowing. After reaching a market capitalization of $1 trillion for the first time last summer, it is now worth about a quarter of that, less than Home Depot.

“Business is not growing in 2022,” said Gil Luria, technology strategist at DA Davidson. “It is expected to increase in the future, but this expectation may turn out to be optimistic.”

A gamble that seemed bold a year ago now seems borderline insane. Meta lost $9.4 billion in the first nine months of 2022 on its metaverse efforts and expects the unit’s losses to “increase significantly year over year” in 2023. This has even led some of Meta’s backers to call on him to rethink his change in strategy. , and maybe slow it down. (It also prompted a tearful “Mad Money” host, Jim Cramer, to apologize to viewers for trusting Meta’s management team and recommending investors buy the stock.)

“People are confused by what the metaverse means. If the company invested $1-2 billion a year in this project, this confusion might not even be a problem. You would just quietly do R&D and the investors would focus on the core business,” Brad Gerstner, CEO of shareholder Meta Altimeter Capital, wrote in an open letter to Zuckerberg this week. He urged Meta to “limit its investments in the Metaverse to no more than $5 billion per year with more discrete goals and metrics of success.”

The current pace of spending, he added, “is bloated and terrible, even by Silicon Valley standards.”

Meta did not respond to requests for comment for this story.

Although the name change was announced only a year ago, Facebook’s transition to Meta took years. Zuckerberg has said in the past that this is a long-term bet for the company, not an overnight transformation. It all started with Facebook’s acquisition of Oculus VR in 2014, and in the years since, the company has released a series of increasingly capable, affordable and usable headsets.

Meta’s latest headset, the Quest Pro, is its first attempt to combine virtual reality immersion with the real world. It can display text and fine details in VR, track eyes and facial features to give you a sense of connection with other people in virtual spaces, and show you a view of the world around you in color, while letting you interact with digital objects — all subordinate to Meta’s goal of attracting more business users.

That’s a far cry from the Oculus Rift headset available in 2016: It cost $599, but users also had to connect it to a powerful computer and use it with a sensor camera on a stand that followed the headset. At first, this headset didn’t even come with tracked hand controllers; it originally shipped to customers with an Xbox controller and a small remote.

Although headsets have improved dramatically, virtual reality and augmented reality are still new technologies in search of purpose and popularity. The VR headset market is still small compared to, say, an established hardware market like video game consoles. ABI Research expects 11.1 million VR headsets to ship this year, of which about 70% will be Quest 2 headsets. This is down from its estimate of 14.5 million headsets in 2021, of which Quest 2 headsets accounted for 85 % of the total.

Some tech experts say these products have potential, including in the workplace, but in the short term, their adoption by everyday users remains uncertain at best.

“I’m not sure this will translate to end users any time soon,” said David Lindlbauer, an assistant professor at Carnegie Mellon University who directs the school’s augmented perception lab. (Meta sponsors Lindlbauer’s research into developing advanced user interfaces for augmented reality and virtual reality.)

For Zuckerberg and Meta, this creates a unique challenge.

Zuckerberg successfully shifted Facebook’s former desktop operations to mobile shortly after taking the company public, a move that helped grow the ad business and ensure its dominance for much of the past decade. But smartphones were already ubiquitous by then; if anything Facebook was a little late.

Now the company is trying to launch new technology and hopes that consumers will follow suit.

Meta positioned change as a kind of existential imperative for business. Since Apple’s app tracking changes hurt Meta’s ability to target ads to its users, the company doesn’t want to rely on external devices or an app store in the future.

A visitor at Tokyo Game Show 2022 tests the Meta Quest 2 VR headset.

But there’s a big difference between looking at a computer or smartphone screen and wearing a headset. While Lindlbauer can imagine wearing a headset for maybe an hour a day, alternating between immersive virtual reality views and digital images that blend into the physical world, “I think we haven’t hit the sweet spot yet of something that I want to I wear it all day long..,” he said.

Meta also faces a big challenge when it comes to showing VR content that users like the look of and want to use repeatedly. According to a recent Wall Street Journal report, internal documents show Horizon Worlds has fewer than 200,000 monthly active users, a rounding error for a company with 3.7 billion monthly active users across its various services. (A Meta spokesperson told the Journal that it’s “easy to be cynical about the Metaverse,” but Meta thinks it’s “the future of computing.”)

“They’re starting with this idea that they want to build a big space like Horizon Worlds where everybody will show up and start building things,” said Avi Bar-Zeev, founder of AR and VR consultancy RealityPrime. and former employees. . at Apple, Amazon and Microsoft, where he worked on the HoloLens VR headset. “No virtual world has ever managed to create a canvas where people just walk in and start painting.”

Zuckerberg personally received strong criticism for how Meta views work and play interactions in virtual spaces after he posted an image of his cartoon-like avatar in Horizon Worlds on Facebook — an image he later admitted was “very simple”.

“When it comes to fast-moving audiences, give me more, the progress we’ve seen so far is disappointing,” said Janna Anderson, director of Elon University’s Center for Imagining the Internet. “The meta suffers tremendous derision on social media and in the minds of the general public.”

Quest Pro’s facial tracking capabilities can help make avatars’ facial expressions more realistic: Initially, users can access this tracking in Horizon Worlds and Horizon Workrooms, Meta said, as well as in some developer apps like Painting VR and DJ app. XR tribe.

But even with face tracking, what users see when they enter Horizon Worlds — blocky, human-like avatars that exist only at the top, floating around a virtual square — will persist for the rest of the world. This moment stands in stark contrast to the image Zuckerberg painted during the Meta’s Connect event on October 11 of his full avatar.

Meanwhile, investors seem fed up with investing in Metaverse at a time when the future of its core business is also deeply uncertain.

“I think to sum up what investors are feeling right now is that there are a lot of experimental bets compared to proven mainstream bets,” Jeffries analyst Brent Thill said during Meta’s earnings call this week.

Zuckerberg, for his part, defends the change in strategy. “I would say there’s a difference between something that’s experimental and not knowing how well it’s going to end up,” he replied. Separately, he added: “I think people will look back decades and talk about the importance of the work that was done here.”

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