How Mark Zuckerberg staked on a metaverse and suffered heavy losses
Lord MatusMark Zuckerberg is a great innovator who founded Facebook, a social media that has more than 2,500,000,000 active users per month, which is about 31,2% of the Earth’s population. He is famous not just for uniting lots of people from all over the world in one place and bringing marketing to a new level but for supporting the idea of metaverses, despite everything.
By saying “despite anything”, we mean giant losses both him and the company suffer. It is worth noting that he even made a radical decision and renamed Facebook into Meta due to his faith in the idea of metaverses. Now, users see the Meta logo and title when launching Facebook and Instagram, which is also owned by Zuckerberg's company.
But what about numbers? Experts have counted that about $36,000,000,000 has been spent since the start of Zuckerberg’s investments in the metaverse industry, namely, since 2019. However, Zuckerberg’s losses were not just about investing money in the metaverse development and losing it. Every unlucky turn of events caused problems not just for his personal purse but the Meta company in general. Zuckerberg managed to become one of the richest persons in the world because his capital, which includes the Meta shares, was equal to $125,000,000,000+.
Due to the fall in the price of Meta shares, Mark has already lost more than $88,000,000,000 out of $125,000,000,000 and it seems that this is not the end of the problems. According to the information provided by Bloomberg, Zuckerberg’s recent fortune was evaluated as $37,000,000,000+.
Not the most satisfying results of the past events cause new questions about quick investments in the project related to the development of virtual reality. Mark Zuckerberg’s metaverse was criticized many times by various investment enthusiasts for the head of Meta being unable to attract users to join virtual universes, despite the general development of this part of the crypto world.
It seems that the majority of Facebook and Instagram users are still not ready to face the world of cryptocurrencies and metaverses, despite NFT tokens being integrated into Instagram. It is worth reminding that Meta introduced the connection of Instagram accounts to Facebook accounts, which is used by many users, so it is fair to state that many Facebook users have already become familiar with the term NFT tokens and know about their integration in Instagram.
The financial reports reflect that Mark Zuckerberg jeopardized not just his reputation, which suffered from such investments, but the future of the company. If Meta keeps losing its stock price, the company might lose the investors’ trust, which will lead to losing a major part of the financing and, as a result, the development of Meta. Zuckerberg has spent tens of billions of dollars in the hope of making metaverses interesting among users and other platforms, including TikTok. As it was said earlier, his attempts are not successful and effective at the moment.
Considering what we can see on the screenshot with the statistics provided by NASDAQ, the National Association of Securities Dealers, Meta's price dropped from $338 to $100 per share in 2022. At the beginning of November, the price even reached $80, which says that Meta’s situation became 3 times worse. Besides, the company has not demonstrated such results since 2016 and it means that Meta returned to the result it achieved 6 years ago.
Reality Labs, the division of the Meta company, which works on the development of metaverses and other activities, which are related to virtual realities, has a few billion dollar debts. It is directly due to the failures Meta has faced trying to improve a metaverse. Reality Labs had a significant impact on the decline of Meta’s general income, on the outcome of which Zuckerberg fired about 13% of employees, which is equal to 11,000 workers.
The first alarming signs appeared in the fourth quarter of 2021 when Reality Labs reported and showed negative results. The overall revenue amounted to $5,300,000,000, while the operating losses were equal to more than $30,700,000,000 since the start of maintaining serious funding for the development of the metaverses. Meta, in turn, reported a serious decline in the user base. Despite all of this, it seems that Zuckerberg is not going to refuse his idea and even if he considers other options, he will not get rid of the idea of metaverses fully.
The first 9 months of 2022 have shown that Reality Labs has a serious loss of $9,400,000,000. The outflow of money from Meta’s capital is not going to stop and, according to the management, it will become even bigger. The reason for it is that losses have become constant and it does not slow down, also, the project does not make profits.
David Werner, the financial director of Meta, has commented on the situation in the following way:
We expect that the operational losses of Reality Labs will grow significantly in 2023 compared to the previous year.
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In his turn, Zuckerberg has recently said that the reason for big losses could be the launch of Quest VR, the new headset by Reality Labs, together with the impact of the first annual salaries of employees hired in 2022. According to the head of Meta, these aspects have become the most important factors of extremely unsatisfying results. Despite big investments in Quest VR, the company expects compensation for losses in the nearest months.
Mark Zuckerberg shared the following opinion in one of his statements:
Even though we are facing short-term revenue issues, there are grounds to return to a bigger growth of income.
We are coming to 2023, paying special attention to setting priorities and effectiveness, which will help us to get used to the current situation and become a stronger company.
Lots of money was invested in Reality Labs. According to the reports, the total investment in the division that works on the development of metaverses amounted to more than $12,500,000,000 last year. Considering that the revenue was only equal to $2,300,000,000 in 2021, this result is extremely negative for Meta. The experts’ reports and expectations reflect the increased amount of money invested in Reality Labs in 2022 and costs will be $10,800,000,000, while total revenue has fallen from $2,300,000,000 to $1,400,000,000. Almost 11 months have passed and December will unlikely change the situation, so we can confidently state the fall of the revenue by more than a third.
Continuing the topic of income and loss reports, it is worth noting that Meta’s operating margin in the third quarter was way lower than the average numbers in 2022. Due to increased costs on Reality Labs, Meta’s operating margin fell from 36%, which was in 2021, to 20% in 2022. It is worth noting that the operating margin of 36% had been before Zuckerberg decided to rename Facebook in Meta to emphasize commitment to his idea of developing the theme with the metaverses. The company was fighting rebranding for a long time and the number of monthly active users dropped from ~3,000,000,000 to ~2,500,000,000+.
As a result, the head of Meta has suffered heavy losses and led the list of billionaires who lost the biggest financial resources, overtaking such mastodons from the world of investment as Jeff Bezos, Larry Page, Sergey Brin, Bill Gates, Elon Musk, and others.
Almost all of Zuckerberg’s money depends on the situation inside his company and the owner has more than 350,000,000 Meta shares. It was revealed in the company’s latest official statement.
In 2022, Meta’s total revenue dropped from $29,010,000,000 to $27,710,000,000, which is 4% less than the last year’s result. However, this is a bit better than what was predicted by analysts who considered that Meta’s maximum revenue would be $27,400,000,000.
Another fact that hurt the value of the company's shares was the lack of growth in new users in February. At that moment, share prices faced a historic collapse and reduced Zuckerberg’s capital by $31,000,000,000. This turn of events was truly memorable because there were very few such multi-billion losses in a day in the history of humanity.
The whole technology industry is not having the best time due to Meta’s situation becoming worse and advertisers are looking for new ways of effective product distribution. Over the past years, marketing technology was stagnating, which is why marketers do brainstorms to understand how to improve the situation.
It is not a secret that many entrepreneurs could successfully distribute their products through Instagram and Facebook thanks to targeting advertisements. The last thing was possible due to algorithms, which considered the interests of Facebook and Instagram users and provided them with ads that helped advertisers to sell their products.