In David Fincher’s The Social Network, Facebook founder CEO Mark Zuckerberg is portrayed as a driven, socially inept wunderkind who nevertheless manages to create a digital enterprise that completely disrupts the way billions of people socialize.
On Wednesday, investors got their first look at Zuckerberg’s second attempt to flip the switch on the way the world communicates. His newly renamed Meta Platforms reported financials for the first time since its CEO unveiled his newfound determination to build a metaverse where humans live out more and more of their lives in digital avatar form.
The Cost of Doing Metabusiness
If Wednesday was a target practice, Meta was shooting blindfolded because it missed the mark. On essentially every key metric, the company – which is the parent of Instagram, and Whatsapp in addition to Facebook — fell short of analyst expectations. Revenue of $33.4 billion missed estimates of $33.7 billion, 2.91 billion monthly active users missed estimates of 2.95 billion, and didn’t grow at all from the last quarter. Notably, Meta’s $10.3 billion profit for the fourth quarter missed estimates of $10.9 billion and marked the first time the company’s income growth fell since Q2 2019.
Meta said people are spending less time on its most profitable platforms — young people prefer Tik Tok and YouTube for their online enjoyment — and advertisers eased spending due to inflation concerns. The company also, for the first time ever, disclosed the finances of its unit dedicated to virtual reality headsets, augmented reality glasses, and the virtual metaverse, which Zuckerberg has staked Meta’s future on:
- The division, known as Reality Labs, lost a very real $3.3 billion in the quarter.
- Meta said in October that investments in Reality Labs would lead to a $10 billion reduction in operating profit this year, and Wednesday’s results sent shares down as much as 24% in late trading.
What’s in a Name? Some criticized Meta’s change of its corporate name as a mere attempt to distract from months of bad publicity but, to Zuckerberg’s credit, Wednesday’s results show billions in resources and talent are being shifted to the company’s metaverse effort even if (for now) they’re a drag on the bottom line.