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Meta’s second quarter results show us that Mark Zuckerberg’s vision of the metaverse is still very expensive. And its losses in the VR division reached $2.8 billion in the second quarter, even as its sales of virtual reality hardware and software continued to grow.
Meta has begun releasing its results from its Reality Labs division (formerly known as Facebook’s Oculus division) to give investors an idea of how much it has invested in the next version of the internet, or metaverse, the universe of virtual world all. interconnected, like novels like Snowfall and Loan player one.
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Yesterday, the company reported bad news (at least for virtual reality software companies) when it announced that it will raise the prices of its Meta Quest 2 VR headsets by $100 each on August 1. It also raised the prices of peripheral products.
Meta Reality Labs generated $452 million in revenue in the second quarter ended June 30, compared with $305 million a year ago and $695 million in the first quarter. The loss for the quarter was $2.8 billion in the second quarter, compared with a loss of $2.4 billion a year earlier and $2.96 billion in the first quarter.
Total net income was $6.69 billion on revenue of $28.8 billion in the second quarter, compared to net income of $10.4 billion on revenue of $29.1 billion last year. Analysts had expected net profit of $7.03 billion on $28.9 billion. Daily active users of Meta are 1.97 billion, which is 3% from last year. Every month, Meta platforms reach more than three billion people.
“Metaverse is a huge opportunity for a number of reasons,” Zuckerberg said on the analyst call. “This allows for a deeper social experience where you feel a realistic sense of the presence of other people no matter what you’re doing,” whether it’s a game or a meeting.
He said that the company has spent money to build it to be the best platform, without the constraints “placed on us by our competitors” i.e. Apple and its costs. Zuckerberg said the metaverse could unlock hundreds of billions of dollars or trillions of dollars over time.
He says it’s obviously very expensive, but the Metaverse will be important to the way we live, and he’s happy to have a part in creating it.
He said the company plans to launch a web-based version of its Horizon social metaverse platform later this year, and the company has heard good things about Project Cambria hardware coming later this year.
In terms of guidance, Meta said it expects Reality Labs’ revenue to be lower in the third quarter compared to the second quarter. Rising prices probably won’t help that.
Zuckerberg has said publicly that there are “probably a bunch of people in the business that shouldn’t be here,” hinting that VR losses and a slowdown in the broader business are already starting to hurt. The company instituted a hiring freeze amid declining ad revenue due to Apple’s privacy breach. And TikTok has become very competitive with Meta in the short video market. On this front, Meta fights short Reels videos.
“It’s great to see a positive trajectory in our engagement trends this quarter coming from products like Reels and our AI investments,” Zuckerberg said, in a statement. “We are devoting more energy and focus to our core business priorities that open up short- and long-term opportunities for Meta and the people and businesses that use our services.”
Starting in August, the Meta Quest 2 will cost $400 and $500 for the 128GB and 256GB versions, respectively. And for a limited time, every new headset purchase will include an offer to download the popular VR rhythm game Beat Saber free.extra charge. Along with these changes, Meta will also raise the prices of Meta Quest 2 accessories and refurbished units.
The workforce was 83,553, up from 77,805 on March 31. The number of 83,553 was up 32% from last year. In an earnings call, Zuckerberg said on the call that the economic downturn and its potential impact on advertising look worse than a quarter ago. And he said the goal is to steadily reduce the workforce next year.
“This is a time that requires more energy and I hope to be able to do more with fewer resources,” he said.
But the company says it’s not giving up on optimism around virtual reality. Zuckerberg said the company is riding the technological waves of AI and the metaverse.
In other news, the Federal Trade Commission filed a lawsuit to block Meta’s proposed acquisition of virtual reality company Within, maker of the subscription-based VR workout app Supernatural.
Colin Sebastian, analyst at RW Baird, said in an email to GamesBeat that Zuckerberg is convinced that the next era of computing is virtual reality and the metaverse, which for Meta represents a potential thread but one also a great opportunity.
“I don’t know how much it cost Apple to spec, design, build and launch the first iPhone and the first mobile operating system (iOS), but Steve Jobs had the vision and resources to take us on a wave of mobile. computing”, said Sebastian. “Mark is sure there is something available, but it is not yet clear if he has the right vision or if his gamble will pay off in terms of commercial success. As such, we want companies that take risks, rely on top engineering talent, and are conditioned to innovate.
He noted that this is how Google can continue to grow even though it is already the largest media and advertising company in the world.
“Now, during a macro downturn, this is a difficult trade-off because investors prefer companies that preserve margins and cash flow, rather than investing in speculative projects,” said Sebastian. “It’s worth it, given the scale of the stakes, but we’d also like to see Reality Labs be accountable for costs, like meeting certain milestones.”
Wedbush analyst Michael Pachter said in an email to GamesBeat, “They clearly think the metaverse is going to be huge and they clearly think they’re going to dominate. I agree with the first, but the second is hard to predict because they it looks like AOL trying to dominate the internet. However, if they don’t invest, they have no chance of winning.
Oculus’ mobile app has more than 20 million installs worldwide to date from the App Store and Google Play, according to measurement company Sensor Tower.
The app saw its highest number of installs in a single month when it reached nearly 2.8 million in December 2021. This contributed to a record rise in quarterly installs in the fourth quarter of 2021, as noted in the table below. Since that record quarter, the Oculus mobile app has seen a quarter-over-quarter decline in adoption; however, it still exceeded its facilities from a year ago, Sensor Tower said.
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