When Mark Zuckerberg decided to rename Facebook (NASDAQ:META) to Meta in October 2021, it was more than just a rebranding exercise; it was an attempt to stake his claim as supreme leader of the trendy tech thing at the time: The Metaverse.
Such was his conviction that the metaverse was the future that he staked tens of billions of dollars and his company’s reputation on it being the next big thing.
Yet for all his proselytising over the technology, interactive digital communities were already gaining massive hype as a crypto-adjacent sector amid the biggest bull run in the cryptocurrency sector of all time.
Projects like The Sandbox, Decentraland and Axie Infinity were gaining huge followings, spurring dozens of imitations and knockoffs.
Whether history cites Horizon Worlds as the progenitor of the metaverse or not, clearly Zuckerberg saw his opportunity to take his shot at taking command of the hype train.
“We believe the metaverse will be the successor of the mobile internet,” Zuckerberg said at the time. “We’ll be able to feel present – like we’re right there with people no matter how far apart we actually are.”
How is it going?
Barely 18 months later, and Meta is finding itself in an odd position.
Zuckerberg is having to convince shareholders that the metaverse revolution that he staked tens of billions of shareholder capital on is even a priority for the company at all.
“A narrative has developed that we're somehow moving away from focusing on the metaverse vision, so I just want to say upfront that that's not accurate,” Zuckerberg said in Wednesday’s earnings call.
“We've been focusing on both AI and the metaverse for years now, and we will continue to focus on both,” he went to lengths to stress.
Yet there is little doubt that much of his shareholder address was centred on that shiny new tech plaything AI. After all, he cited AI “as the key theme I want to discuss today”.
Has Zuckerberg once again found himself playing catchup to global tech trends? His conviction for AI sounded as steadfast as his conviction for the metaverse in 2021.
“I think there’s an opportunity to introduce AI agents to billions of people in ways
that will be useful and meaningful. We’re exploring chat experiences in WhatsApp and Messenger, visual creation tools for posts in Facebook and Instagram and ads, and over time video and multi-modal experiences as well.
“I expect that these tools will be valuable for everyone from regular people to creators to businesses,” he gushed.
In comparison, the metaverse felt like more of a footnote to Zuckerberg’s address: “Building the metaverse is a long-term project, but the rationale for it remains the same and we remain committed to it.” Hardly the passionate words we heard in 2021.
Much of the discussion around Reality Labs, the division responsible for building Horizon Worlds, was taken up by chief financial officer Susan Li.
Fielding a question about the mindboggling capital expenditure being thrown into the metaverse (a further US$4bn in the last quarter alone, compared to a paltry US$339mln in revenues created), Li spoke of “reevaluating road maps, deprioritising projects. Effectively, I would think of that as areas where we are shrinking scope.”
Li said Reality Labs will continue to rack up losses beyond 2024.
AI pays off for Meta
AI, on the other hand, already appears to be paying off. More than 20% of content appearing of people’s Facebook and Instagram feeds is now recommended by AI.
AI recommendations have driven a more than 24% increase in time spent on Instagram Reels, according to Zuckerberg.
“Reels monetisation efficiency” is up over 30% on Instagram and over 40% on Facebook quarter-over-quarter, apparently thanks to AI.
It’s no wonder why Zuckerberg appears to have jumped on the post-ChatGPT AI bandwagon so quickly; it appears to be value accretive for the group.
Meanwhile, The Sandbox and Decentraland are more ghost towns than thriving digital hubs, the metaverse as a concept often finds itself as the butt of people’s jokes, and Horizon Worlds is years away from ever turning a profit.
The metaverse hype train ran out of fuel pretty damn fast, leaving Zuckerberg with a massive conundrum- Carry on or cut his losses?
It’s funny to think that not too long ago, Mark Zuckerberg was at the forefront of internet innovation. For better or worse, Facebook changed how people lived their lives and altered the face of digital communication indefinitely.
Yet now it seems like Zucc is struggling to keep up with the ever-changing face of digital communication. Hell, Horizon Worlds avatars don’t even have legs yet.