Meta Shifting Investment, Stock Rises as Metaverse Plans Scaled Back
Meta is significantly reducing its investment in the metaverse, a strategic shift driven by investor skepticism and the project’s underwhelming performance. According to a Bloomberg report, CEO Mark Zuckerberg is slashing the metaverse team’s budget by as much as 30%, sending a clear signal to the market. CNN has not independently confirmed this report, but the move has already bolstered investor confidence, causing Meta’s stock to rise 7% early Thursday.
The company, formerly known as Facebook, has been investing heavily in the metaverse through its Reality Labs division, a strategy that began four years ago with the ambitious goal of building a vast, immersive virtual world. However, the metaverse, spearheaded by Zuckerberg’s vision of it as “the successor of the mobile internet,” has consistently failed to gain traction. Initial targets, such as achieving 500,000 monthly active users in Horizons Worlds by the end of 2022, were revised downward nearly halfway through the year, indicating a lack of user engagement.
The current shift reflects a broader market reassessment of the metaverse’s potential. Initially, the concept lacked widespread appeal, particularly after the COVID-19 lockdowns. The idea of spending significant time in virtual worlds, equipped with bulky headsets costing $400, didn’t align with the public’s desire for real-life social interactions. Meta’s initial attempts to replicate the “cool” factor of Facebook – where users could curate a specific image and vibe – proved ineffective in the metaverse, where the graphics were perceived as dated and lacking in appeal.
Recognizing this, Meta is now pivoting its investment towards other ventures. Savings from the metaverse cuts are expected to be directed towards AI glasses and wearables, reflecting a strategic move to capitalize on emerging technologies. Notably, Meta is seeking to bring in Apple’s top designer, Alan Dye, to lead a new studio focused on hardware, software, and AI integration. This shift demonstrates an awareness that aesthetics and demonstrable product value are crucial for attracting investment and user adoption.
According to individuals familiar with the plans, Meta currently holds a leading market share in smart glasses and AR/VR headsets, capturing 61% of the market according to IDC Global. However, the financial returns from these endeavors remain uncertain, and Wall Street has expressed concerns about Zuckerberg’s willingness to invest heavily in unproven technologies, as he himself acknowledged in a September podcast interview, stating that “If we end up misspending a couple of hundred billion dollars, I think that that is going to be very unfortunate, obviously.” Despite these significant investments, Meta is committed to pursuing new opportunities, signaling a strategic correction after a prolonged period of metaverse-focused expenditure. For more CNN news and newsletters create an account at CNN.com
