Key Points:
- Reality Labs is proving to be a greater money pit than anticipated.
- By 2022, the division had lost $13.7 billion. It posted a fourth-quarter loss of $4.28 billion.
Despite operating losses for its Reality Labs division reaching its height in 2022, Meta’s founder and CEO, Mark Zuckerberg, claims the company has no intentions to alter its long-term metaverse strategy.
As predicted by analysts, Meta’s metaverse division could record a loss of up to $14 billion in 2022.
The company’s virtual reality technology and initiatives are housed in Meta’s Reality Labs subsidiary, which reported an operating loss of $13.72 billion for 2022 in its financial report released after the bell on Wednesday.
The division lost around $4.28 billion during the fourth quarter, which was also the department’s worst quarterly loss since the company’s financials were first made public.
For the newly formed Meta, the organization formerly known as Facebook, the first full year was difficult. Zuckerberg changed the company’s name in late 2021 and said that its future rested in the Metaverse, a virtual world where people would work, shop, play, and study. However, it is now only a cost center, and Meta is still an internet advertising business.
Zuckerberg was unwavering in the company’s metaverse plan during an earnings conference on February 1. In response to a query on how Reality Labs fits into the company’s efficiency, he replied:
“None of the signals that I’ve seen so far suggest that we should shift the Reality Labs strategy long term.”
He stated that once the Quest Pro Virtual Reality (VR) headset was introduced in October, the company would release another “next generation consumer headset” later in 2023.
Sales of Quest headgear helped Reality Labs create $727 million in the fourth quarter and $2.16 billion in total revenue for 2022, down from $2.27 billion in 2021. In other words, although making up less than 2% of all sales at Meta, the business lost more than six times as much money as it did in revenue the previous year.
Meta said in July that it would be increasing the cost of its Quest 2 VR headset by $100. At the time, the corporation claimed that the price increase was required to reflect inflationary pressures. In October, Meta unveiled its more pricey Quest Pro VR gear, positioning it as a $1,500 enterprise-workplace tool. This week, Meta is offering a $400 discount on their premium VR gear for a certain period of time.
The company predicted in its annual report from the previous year that Reality Labs operating losses in 2023 will climb dramatically.
The early results have not exactly pleased shareholders. Due to rising metaverse costs, a weakening economy, greater competition from TikTok, and Apple’s privacy update, which restricted ad targeting, Meta lost roughly two-thirds of its worth in 2022.
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Harold
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