shares in this article
• High expectations for Metaverse trend
• Criticism of Meta Horizon Worlds is growing
• Major shareholder advocates savings
Metaverse was a hot topic last year. The “next generation of the Internet”, as the concept is often called, should enable virtual worlds in which users can exchange information digitally. In addition to younger providers such as The Sandbox or Decentraland, some tech giants are also participating in the trend. For example, the chip group NVIDIA offers with its Omniverse a platform on which metaverse applications can be created and operated. The company promises that individual 3D models can be created there and virtual environments can be simulated quickly. The Metaverse companies also include – as the company name suggests – the Facebook parent company Meta Platforms.
Facebook is becoming meta platforms
Company boss Mark Zuckerberg is so confident in the digital world that he renamed the Facebook group Meta Platforms last year. “The next platform will be even more immersive – an embodied internet where you dive into the experience and not just look at it. We call this the Metaverse and it will impact every product we build,” the CEO announced in an October 2021 letter . “To showcase who we are and the future we want to build, I’m proud to announce that our company is now called Meta.” The group bundles the applications Facebook, Instagram and WhatsApp, but also the Metaverse division under the new company name.
Metaverse has not been successful so far
The Zuckerberg company is already offering a first Metaverse version with Meta Horizon Worlds. “It’s an ever-expanding social universe where you can hang out with friends, meet new people, play games, attend cool events, and explore more than 10,000 worlds and experiences,” says the company’s website. However, the free app can only be used in combination with the VR headsets from the Meta Quest series. In the past, the relatively simple graphics of the VR game and simplified avatars, which previously had to do without a lower body, also caused criticism. However, in October, Zuckerberg announced some graphical improvements. For Paul Tassi of the business magazine “Forbes”, however, the pace of development is too slow. “If the main announcement is the fact that after years and years of investment you are about to debut virtual characters with legs, then something has gone wrong,” said the tech expert.
In addition to the software updates, the Meta boss also announced new VR glasses: the Meta Quest Pro. While the entry-level Meta Quest 2, which is still available, starts at $399.99, the Pro version costs a minimum of $1,499.99, depending on configuration. Zuckerberg unveiled a $1,500 Oculus Pro headset, [das so viel kostet wie] a PS5, Xbox Series X and Quest 2 together,” Tassi joked. to exist. His take on an AR/VR based metaverse remains a niche, not something for a multi-billion dollar company to focus on.”
User numbers are below expectations
This assumption is supported by the low number of users of the service. As evidenced by the company’s internal documents available to the Wall Street Journal, Horizon Worlds is used by fewer than 200,000 members per month. Initially, Meta aimed for 500,000 monthly active users, but that number was later revised to 280,000. According to the newspaper’s report, the majority of users do not return to the application after the first month. The number of users has also been steadily declining since the spring. In comparison, Facebook, Instagram and WhatsApp together average more than 3.5 billion users per month. “An empty world is a sad world,” the paper quoted an internal meta-document.
Meta share under pressure since renaming
In the third quarter of 2022, Meta’s Reality Labs division, which develops the company’s Metaverse efforts, suffered an operating loss of approximately $3.7 billion. For the year, the minus is already $9.4 billion. Zuckerberg thinks losses in the area could increase further in 2023. In response to the weak data, the group is reportedly planning to cut numerous jobs, media reports have reported. According to the Wall Street Journal, several thousand workers fear for their jobs.
The problems that Meta has caused with its focus on the digital world can also be seen in the company’s course. Shortly before the name change, the group briefly reached a market cap of one trillion dollars. Zuckerberg can only dream of that right now. With a final price of USD 113.23, the market value of the group is still USD 310.46 billion (as of the closing price on November 16, 2022). Within a year, the Meta share already lost 66.34 percent of its value.
Meta has “drifted to the land of excess”
Brad Gerstner, CEO of Altimeter Capital, apparently does not want to accept the further price drop. At the end of the second quarter, the investment company owned 2.458 million shares in the IT group. Rigid adherence to the Metaverse has long been a thorn in the side of the major shareholder. In an open letter to Zuckerberg, Gerstner wrote that the Metas project was supported by “continuous investment in a product-centric future and the mission to make the world more open and connected,” but that the group had lost its way. “Like many companies in a no-cost world, Meta has drifted into the land of excess — too many people, too many ideas, too little urgency. That lack of focus and fitness is masked when growth is easy but deadly, when growth slows down and technology changes,” the Altimeter boss warned.
Lost investor confidence
Meta has increased spending, but at the same time investor confidence has been lost. “The conventional wisdom – press and investor – is that the core business hit a wall last fall. As a result, the team hastily flipped the company over to the Metaverse – including a surprise company name change to Meta,” Gerstner continued. “Worse, that skepticism appeared to be confirmed by an almost immediate and significant downturn in financial results and continued underperformance in 2022.” The fact that this calculation was not successful is confirmed by the investor’s weak share price.
In order to return to its core competencies while regaining the trust of investors, employees and the tech industry, Meta must achieve three goals: reduce personnel costs by 20 percent, annual investments by at least $5 billion to $25 billion – Dollars will be cut and spending on Metaverse technology will be capped at $5 billion per year. If Meta were to implement these measures, the company’s free cash flow could increase by at least $20 billion by 2023, according to the major investor’s estimate. The price of the Metas share would also benefit from this.
Metaverse trend confusion
Gerstner sees the biggest problem with the hype surrounding Meta’s Metaverse efforts that the subject is drawing too much attention and confusion, which is certainly also due to the group’s renaming. This gives the impression that the company is completely focused on the Metaverse technology, which does not correspond to reality. In addition, according to the head of the investment company, the majority of people are not at all clear about what the Metaverse concept actually entails – a point of criticism that Apple CEO Tim Cook recently voiced. “If the company invested $1 billion to $2 billion a year in this project, maybe this confusion wouldn’t even be an issue. They would just do research and development quietly and investors would focus on the core business and breakthroughs in the industry. Focus on AI,” Gerstner stressed. “Instead, the company has announced investments of $10 billion to $15 billion per year in a Metaverse project that will be primarily AR/VR/immersive 3D/Horizon World and could take 10 years to see results.”
The leverage must be between 2 and 20
Image Sources: rafapress / Shutterstock.com, Meta