Financial Associated Press (Shanghai, editor Xiaoxiang) news, in advance, perhaps no one thought that Facebook's first financial results conference after changing its name to Meta Platforms actually became the trigger for its stock price collapse. And all this is causing the capital market to re-examine the grand meta-universe blueprint it depicts...
Last week, a number of large US technology stocks finally came out of the haze after the January slump, but Meta is not among them. The social media giant Meta just suffered an "unprecedented" plunge in U.S. stock history — closing down 26.44 percent at $237.60 for the whole day on Thursday, the biggest drop the stock has ever seen. In terms of market capitalization, Meta's market value evaporated by about $251.3 billion in a single day, about 1.6 trillion yuan, which created the largest single-day market value decline in the history of the US stock market.
The plunge in Meta's stock price directly led to Zuckerberg's net worth shrinking by $31 billion in one day, and according to statistics, Zuckerberg's evaporated net worth even exceeded the market capitalizations of Twitter and Delta Air Lines, which are currently about $28 billion and $25 billion, respectively.
Zuckerberg officially announced the renaming of Facebook to Meta Platforms at Facebook's annual Connect conference on October 28 last year, threatening to "believe that the metacosm will be the next chapter in the development of the Internet and the next chapter in our company." As a result, under Zuckerberg's "arm-raising", 2021 was once praised by the industry as the first year of the "meta-universe".
However, in just over three months after the name change, Meta's report card is obviously not ideal.
In the first financial report data disclosed to investors to present the meta-universe, its meta-universe business is still in the crazy cash-burning stage - a huge loss of more than ten billion US dollars, and more worryingly, the company's original "basic disk" is also facing a decline in performance: Facebook daily active users for the first time showed a month-on-month decline, showing that user growth has peaked; the share of the online advertising market is also being eroded by Google and others, and various signs indicate that its good days of lying in the advertising market have come to an end.
As for Facebook's biggest "enemy" in the short video business, TikTok, it is still a mountain that cannot be crossed in front of it...
Meta, which was expecting to make a difference in 2022, seems to have unfortunately become a "sick cat" at the beginning of the Year of the Tiger!
The metaverse of "burning money"
How costly is Meta's transition to metaverse? Meta's disclosure of facebook Reality Labs (FRL) as an independent division for the first time in this earnings report shows that the latest data shows that the division only achieved revenue of $2.3 billion in 2021, and the annual operating loss reached $10.19 billion.
Previously, the business also lost about $4.5 billion and $6.6 billion in 2019 and 2020, respectively, and last year's loss was almost 50% more than in 2020.
Founded in 2018 to focus on VR/AR technologies and products, reality Labs is at the heart of the realization of Zuckerberg's vision of a meta-universe, producing the hardware Quest 2, one of the best-selling VR devices on the market today. Andrew Bosworth, head of Reality Labs, was just promoted to CTO (Chief Technology Officer) at Meta this year, and the Harvard-educated executive has been with Meta for more than 16 years.
In order to prioritize everything in the metacosm, Zuckerberg did not hesitate to change The name of Facebook is enough to show his ambition to try to make a world in this field, and the above-mentioned loss of more than $10 billion for the whole year does show that Zuckerberg is not at all lenient in spending money on the metaverse.
According to John Sines, Meta's chief financial officer, $4.2 billion of the more than $10 billion burned was spent on staff costs, research and development and sales costs. Sines also expects Reality Labs' losses to "significantly increase" in 2022...
According to Meta's vision, it will recruit more employees to participate in the meta-universe project this year, and in the next five years, the number of employees in Europe alone will reach 10,000. The company has even started a talent war in the industry: Microsoft's AR team lost about 100 employees in the past year, and some of these people have switched to Meta... According to data provided by the recruitment website Indeed, the salaries of some meta-universe-related senior positions in the market have more than 10 times increased due to this boom.
Even Zuckerberg himself admits that in the next 1-3 years, it will still be mainly the stage of laying the foundation for the meta-universe, and these investments are unlikely to achieve any profit in the short term.
Zuckerberg has previously said, "We hope that in the next decade, the metaverse will reach 1 billion people, carry hundreds of billions of dollars in digital commerce, and provide jobs for millions of creators and developers." Zuckerberg firmly believes that the next generation of the Internet is the meta-world — a theoretical concept that still seems relatively vague at present, and he is willing to invest heavily in it.
How is the metaverse built?
For Meta investors, behind the "burning money" in the metaverse field, perhaps more concerned is how this virtual world is built today - when will the investment in the metacosm be able to generate large-scale income, and when will it be truly profitable?
In this regard, Zuckerberg's own statement on the earnings call seems to be full of confidence. The Meta founder and CEO said, "We will continue to invest in those key priorities in 2022 while working to build a metaverse." We will focus on the underlying hardware and software needed to build an immersive, tangible metaverse to enable a better digital social experience than any product today. ”
In terms of hardware, Meta has seen the market appeal of the headset Quest 2.
Zuckerberg noted that "the total amount of money people spend in the Oculus content market has reached the $1 billion level, which has helped vr reality developers expand and sustain their businesses." We've also just experienced a strong holiday shopping season, with Oculus topping the U.S. App Store for the first time at Christmas. We are working to release a high-end virtual reality headset later this year and continue to make progress on developing Project Nazare, our first fully augmented reality smart glasses. ”
As for the software level, Zuckerberg said, "The virtual world platform Horizon is at the heart of our metaversy vision. We recently opened up a beta version of this social virtual reality world to users in the U.S. and Canada. We've seen many talented creators working together to build this virtual world, where producers can collaborate and meditate in a relaxed way. ”
This year, Meta also plans to release a mobile version of Horizon — something that would limit the early meta-world experience to more than just VR devices.
Zuckerberg noted, "At that time, while the deepest, most immersive experiences will still require virtual reality devices, people will also be able to access the metaverse world from Facebook or Instagram apps, and may implement more and more interactive content over time." This will allow us to build richer social experiences where you can connect with your friends in the metaverse whether or not your friends are in VR or not. ”
Meta is also paying more and more attention to the design and development of avatars in the virtual world. In December, Meta launched the Meta Avatars SDK to all Unity developers on Quest, Rift, and Windows-based VR platforms, allowing developers to bring Meta avatars to their own VR experiences.
Meta also recently announced an update that allows people to further customize their characters in the metaverse and better represent themselves – Meta will also introduce digital clothing. The first is to partner with the NFL so that people can cheer on your favorite teams, and people can also use their avatar avatars on Quest, Facebook, Instagram, and Messenger. Avatars will be another bridge between Meta 2D social apps and 3D immersive virtual reality experiences.
Zuckerberg noted, "We still have a lot of work to do to make avatars more expressive and realistic, as they will fully represent us in the metaverse and help us feel like we are with others." But I'm very excited about the progress we're making so far. ”
Does the investment really pay off?
It is undeniable that the pioneering and innovation of any field requires huge manpower and capital investment in research and development in the early stage, not to mention the cutting-edge concept of science and technology such as meta-universe. However, such a crazy rate of burning money is still enough to make the market worry about the company's performance in the next few years: it is foreseeable that for a long time to come, Mate's meta-universe business is destined to remain unable to contribute to profits and will continue to drag down the company's cash flow.
The metaversic system and rule elements based on AR technology, blockchain, 3D vision, cloud computing, and even brain-computer interfaces, digital twins, artificial intelligence and other cutting-edge technologies are much more complex than the simple mobile Internet. Any company that wants to achieve the ultimate breakthrough innovation in this field may eventually need to build a complex ecosystem supported by scene content, front-end device platforms, and underlying technologies.
Some Wall Street analysts have said that because the metaverse is still not clearly defined, Meta may need to spend "tons of cash".
At the same time, there is still no evidence that Meta's big bets in the metaverse field will necessarily pay off. Unlike Facebook, which turned to mobile devices in 2012, the use of virtual reality is still niche area for enthusiasts and has not really gone mainstream yet. The popularity of augmented reality headsets will also take at least a few months — if not years.
Even in some areas where Meta has gained market advantage at present, whether it can finally laugh to the end is also facing a big question mark.
Previously, Due to the success of the acquisition of all-in-one headset manufacturer Oculus, Meta's leading position in the virtual reality (VR) field has been talked about by the industry. But in the future, competition in this area is also destined to intensify.
There have been recent rumors that Apple's first mixed reality headset could be available as soon as this year. Compared with Oculus, which does not have an autonomous underlying operating system, once Apple has an autonomous system + app store + hardware, Meta's first-mover advantage in the metaverse field is likely to face an impact.
In other words, even if the metaverse era does come in the future, it is difficult to say whether this era belongs to the Meta that first shouted this slogan. At present, compared with the meta-universe business that bets on the future and is full of uncertainty, the challenges faced by a series of core businesses in Meta reality may have reached the situation of "burning eyebrows"...
While data released on Wednesday showed a slight increase in new users in its app family, which includes Instagram, Messenger and WhatsApp, the number of daily active users on its core Facebook platform in the fourth quarter of last year declined sequentially: 1.93 billion daily active users (expected 1.95 billion) and 2.91 billion monthly active users (expected 2.95 billion). Meta also issued its most serious warning to date about how Apple's new advertising privacy policy is stirring up the digital advertising industry. Meta Chief Financial Officer Dave Wehner expects Apple's policies to cost it more than $10 billion in sales in fiscal 2022, which equates to about 8 percent of its total revenue last year.
In addition, in the video field that Zuckerberg has been eager to make a breakthrough, Meta is still struggling to grab more cake from TikTok. This phenomenal social app, developed and operated by ByteDance, already has more than 1 billion users worldwide, and its short video content is highly shareable and easily addictive. In order to attract attention and attention, Zuckerberg tried to clone TikTok, adding a video product feature called Reels to Instagram, but so far its publishing feature richness is still a huge gap from TikTok.
Of course, there are still some people in the industry who still have expectations for Meta's metaverse transformation. Private investment firm J. Christopher Rossbach, chief investment officer at Stern &;Co., remains optimistic about Meta's metaverse prospects. He argues that Meta's massive investment in the metaverse, while displeased when ordered to investors, shows its ability and willingness to become a leader in this new space and will eventually yield substantial returns.
Rossbach also believes that "The reason why Meta's fourth-quarter earnings look so bad is partly because they compare to the period of extraordinary growth when the outbreak was severe a year ago." Despite slower user growth and rising costs, Meta's fundamentals for revenue and profitability remained strong in the fourth quarter.
For Rossbach, the plunge could look like a buying opportunity. Now that Meta's share price valuation is attractive, any further setbacks will make it a more attractive opportunity for long-term investors. ”
Perhaps, Zuckerberg's metaverse transformation path, whether it is a dead or dead end, only time can test. As Buffett famously said, "When the tide recedes, you know who's swimming naked"!