Last week, Meta’s division that will help develop the Metaverse, Reality Labs, released their third-quarter earnings report that showed their net income decreased by $2.29 billion from the second to the third quarter of 2022.
Reality Labs’ net income losses have been constant over the last year and a half, with losses reported every quarter this year. Reality Labs’ revenue also decreased by $1.11 billion in the third quarter, the second consecutive quarter Reality Labs has recorded revenue losses.
The earnings report indicated revenue losses will continue for the company through 2023. In the report, the CFO of Reality Labs stated:
“We do anticipate Reality Labs operating losses in 2023 will grow significant year over year. Beyond 2023, we expect to pace Reality Labs investments such that we can achieve our goal of growing overall company operating income in the long run.”
Meta / Third Quarter 2022 Results
Shareholders across the board are beginning to take notice of these losses. Last week, a major Meta shareholder, Altimeter, wrote a letter to Meta’s Board of Directors, stating:
“At the same time that Meta ramped up spending, you lost the confidence of investors…. The facts are startling. In the last 18 months, Meta stock is down 55% (compared to an average of 19% for its bug-tech peers) …. And notably, this decline in share price mirrors the lost confidence of the company, not just the bad mood of the market.”
Brad Gerstner / Medium
Is the Metaverse a reality we will see anytime soon?
With Reality Labs’ financial woes mounting, the question arises: Will Reality Labs have the resources to develop the Metaverse? In other words, is the Metaverse a reality we will see anytime soon? Some believe we are a long way from the official existence of the Metaverse. In her New York Times article, Lauren Jackson writes:
“The problem is, the Metaverse can’t be manifested with just wishful Silicon Valley thinking. While much of our lives have already shifted online during the pandemic, making those experiences truly immersive at scale is a knotty challenge. The metaverse is currently stalled by a lack of infrastructure (the hardware and software aren’t ready yet), a monopolistic approach to platform development (the metaverse is likely to require more openness and collaboration) and a lack of clear governance standards (some experts want to avoid reinscribing the pitfalls of social media).”
Lauren Jackson / New York Times
While the Metaverse has not technically been built yet, technology experts note that we are currently living in a time when the groundwork for the Metaverse is being laid, in the age of the multiverse. The multiverse has been defined, in technological terms, as the multitude of separate digital platforms that currently exist, each with its own characteristics, games, and subgames – while the Metaverse would be a single digital platform where one could seemingly do most of everyday life’s tasks: work, attend class, see a concert, go shopping.
Examples of platforms in the multiverse include Horizon Worlds, a virtual reality world where your avatar can interact with other avatars, and Fortnite, the popular online game where users are often treated to concerts from the avatar versions of their favorite artists. Companies like Meta, Sony, and Epic Games comprise part of the multiverse’s ecosystem and are laying the groundwork for the Metaverse.
But in order for Metaverse to come to fruition, Meta must combine many of the multiverse’s elements into one virtual world, and it’s clear that just hasn’t happened yet. The task of integration seems to be a tall order. For one, the equipment necessary to access a potential Metaverse just isn’t fully developed.
While more companies are starting to produce VR headsets, the hope is that innovation will improve the quality of these products. But as of right now, the Meta Quest 2 headset goes for $399 on Amazon. And, let’s be honest, its clunky design is certainly no fashion statement. Stephen Gregory of Cointelegraph notes:
“Advanced VR equipment will most likely be needed to allow us to immerse ourselves in these virtual worlds. Yet, customers have previously shown resistance to buying the often expensive and bulky VR headsets and other hardware. The first Oculus headset launched more than five years ago. It has not come anywhere close to the same mainstream adoption as more compact and convenient hardware, like the mobile phone or laptop.”
Stephen Gregory / Cointelegraph
Further, the rules and regulations for the metaverse platform have yet to be clearly defined. In Horizon Worlds, sexual harassment and harmful behavior have already been reported. Without a detailed plan for community moderation, actions like this will continue to happen, deterring many users from using the platform.
These factors have contributed to the lack of interest and accessibility for some of the current multiverse platforms and seriously call into question Garner’s prediction that 35% of people will spend at least one hour per day in the metaverse by 2026. Because, at the end of the day, public interest and accessibility will likely be the two biggest factors that help bring the Metaverse into existence.
If the idea of the Metaverse does not catch on and people don’t buy VR headsets, companies like Reality Labs will continue to see decreasing revenues, giving them fewer financial resources to make much-needed changes involving the Metaverses platform, equipment, and community moderation, thereby deterring more users in a self-perpetuating cycle.
