Meta's poor Metaverse division reveals the true cost of hemorrhaging

Rachel Foster Jones, Thematic Analyst at GlobalData, a leading data and analytics company, offers her view:

“The cost of Mark Zuckerberg’s metaverse ambition is clearer than ever. Meta has put its entire business on the line for the metaverse, which still doesn’t exist, and the gamble is not paying off. Meta has been too busy attempting to push the metaverse that it has run its core ad business into the ground, and a string of poor results has taken its toll on investor confidence. If this continues, Meta will no longer be able to rely on ad-generated revenue to serve its metaverse ambitions.

“Meta, like all Big Tech, is feeling the pressure of a challenging global economic situation and weak advertising environment. However, there is more to Meta’s fall from grace than just tailwinds caused by this, Apple’s privacy changes, and competition from TikTok. Zuckerberg has let the narrative of the metaverse take over the company, and investors are concerned about plunging more money into this endeavor. Times of economic uncertainty should incentivize Meta to look inward at its core business model. The metaverse will likely not be profitable for another decade, and threats of hiring freezes are not enough to convince investors that Meta is focusing on what will pay the bills now.

“The company needs to capitalize on its billions of daily active users. During spending cuts, a social media advertising model should be more resilient than other approaches, such as search engine models. Meta is competing with TikTok and has successfully grown Reels engagement, but Reels need to be profitable, or engagement growth will draw users away from profitable surfaces such as the newsfeed. Meta should focus on ramping up its R&D to monetize its short-form video content rather than its hemorrhaging metaverse division.”