Mark Zuckerberg. Photo / Supplied
Meta has taken a gamble and so far it’s been a US$676 billion (NZ$1.1 trillion) mistake.
In October last year, Facebook founder Mark Zuckerberg changed the social media platform’s name to Meta and introduced the metaverse.
But now, a year later, the company is haemorrhaging money; Meta has shed an eye-watering US$676b ($1.1t) in market value this year.
The tech platform is now well and truly out of the ranks of the world’s 20 most valuable companies, according to Bloomberg.
The failed metaverse experiment came into stark reality this week when Meta announced its results for the latest quarter, which sent the market into a meltdown.
Meta reported on Thursday (AEST) that its profit more than halved to US$4.4b ($7.5b) in the third quarter from US$9.2b ($15.7b) a year earlier.
That means they made US$4.8b ($8.1b) less in that period than the year before.
Meta’s shares tumbled 25 per cent, its worst one-day drop since February. And critics think the metaverse is mostly to blame.
Rachel Foster Jones, a thematic analyst at GlobalData, told the Guardian UK: “Meta has put its entire business on the line for the metaverse, which still doesn’t exist, and the gamble is not paying off.”
According to reports released by the company, Meta has continued to pour money into the alternate reality venture though it has yet to pay off.
“I get that a lot of people might disagree with this investment,” Zuckerberg said of the metaverse.
So far this year, Meta has spent US$9b ($15.3b) on Reality Labs, which is involved in creating the metaverse.
Of that US$9b ($15.3b), US$4b ($6.8b) was used up in the last three months alone.
That arm of the company spent US$10b ($17b) last year but they’ve already indicated there are more funds in the pipeline.
“We do anticipate that Reality Labs losses in 2023 will grow significantly year-over-year,” the company said.
Meta has also spent more than US$100b ($170b) on research and development into the metaverse while it splashed US$15b ($25.6b) into product development in the past 12 months.
The firm has indicated it will start to “pace” its expenses into the project after 2023 to “achieve our goal of growing overall company operating income in the long run”.
At the moment, however, the cash is being happily burnt through.
During a conference call recently, Zuckerberg said spending on Reality Labs was only going to get worse as they were about to launch a new virtual reality headset. On top of that, costs are snowballing as they have to pay staff working on the metaverse, including engineers.
Analysis from Bloomberg found that Zuckerberg, 38, has endured “the single biggest hit” out of the world’s billionaires in the past 13 months.
At time of writing, the Silicon Valley executive holds a net worth of US$38.1b ($65b).
While that’s a lot of money, it’s a stark figure when you consider that Zuckerberg’s fortune peaked at US$142b ($242b) in September last year.
That represents a wipe-out of more than US$100b ($170b) in the past 13 months.
There was a time when Zuckerberg was the third-richest person in the world, behind only Jeff Bezos and Bill Gates.
At time of writing, he ranked 23rd.
The same could be said for his company. Meta used to be the sixth-biggest US company by market capitalisation, worth a whopping US$1t ($1.7t) at the beginning of 2022. Now it’s worth a quarter of that, at US$260b ($443b), coming in at 27th in the world.
Zuckerberg holds around 350 million shares in Meta.
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