Metas Horizon Worlds Hasn’t Made a Breakthrough So Far: Major Meta Stakeholder Demands Metaverse Spending Cuts | 11/22/22

• High hopes for the Metaverse trend
• Meta Horizon Worlds crit increases
• The majority shareholder pleads for savings

metaverse trend

Metaverse was a hot topic last year. The “next generation Internet”, as the concept is also often called, should create virtual worlds in which users can exchange information digitally. Besides younger providers such as The Sandbox or Decentraland, some tech giants are also involved in the trend. The NVIDIA chip group, for example, offers with its Omniverse a platform on which metaverse applications can be created and operated. The company promises that individual 3D models can be created there and that virtual environments can be quickly simulated. The Metaverse companies also include – as the company name suggests – Facebook’s parent platforms.

Facebook becomes meta-platforms

business owner Mark Zuckerberg has such confidence in the digital world that he quickly renamed the Facebook group Meta Platforms last year. “The next platform will be even more immersive – an embodied internet where you dive into the experience and not just watch it. We call it the Metaverse and it will affect every product we build,” the CEO announced in October 2021 in a letter. . “To show who we are and the future we want to build, I am proud to announce that our company is now called Meta.” The group thus combines the Facebook, Instagram and WhatsAppbut also the Metaverse division under the new corporate name.

Metaverse has not been successful so far

Zuckerberg’s firm already offers a first Metaverse version with Meta Horizon Worlds. “It’s an ever-expanding social universe where you can hang out with friends, meet new people, play games, attend cool events, and explore more than 10,000 worlds and experiences,” the website says. of the company. However, the free app can only be used in combination with Meta Quest series VR headsets. In the past, the VR game’s relatively simple graphics and streamlined avatars, which previously had to do without a lower body, have also drawn criticism. In October, however, Zuckerberg announced some graphical improvements. For Paul Tassi of the business magazine “Forbes”, however, the pace of development is too slow. “If the most important announcement is the fact that after years and years of investment, you are about to launch virtual characters with legs, something has gone wrong,” said the expert in technology.

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Material too expensive

Along with the software updates, the Meta boss also announced new VR glasses – the Meta Quest Pro. While the entry-level Meta Quest 2 model, which is still available, starts at $399.99, the Pro version will cost at least $1,499.99, depending on configuration. “Zuckerberg has unveiled a $1,500 Oculus Pro headset, [das so viel kostet wie] a PS5, Xbox Series X and Quest 2 together,” Tassi joked. society needs it or needs it to really exist. His take on an AR/VR-based metaverse remains niche, not something a trillion-dollar company can focus on.”

The number of users is below expectations

This assumption is supported by the low number of users of the service. As the company’s internal documents, accessible to the “Wall Street Journal”, show, Horizon Worlds is used by less than 200,000 members per month. Meta initially set a goal of having 500,000 monthly active users, but later revised that number to 280,000. According to the newspaper report, the majority of users do not return to the app after the first month. The number of users has also been steadily declining since the spring. For comparison: Facebook, Instagram and WhatsApp together average more than 3.5 billion users per month. “An empty world is a sad world,” the newspaper quoted in an internal meta document.

Meta share under pressure since name change

In Q3 2022, Meta’s Reality Labs division, which expands the company’s Metaverse efforts, incurred an operating loss of approximately $3.7 billion. For the year the minus is already 9.4 billion US dollar. Zuckerberg believes that the region’s losses could increase further in 2023. In response to the weak data, the group apparently wants to cut many jobs, as reported by the media. According to the Wall Street Journal, several thousand employees fear for their jobs.

The problems Meta has caused by focusing on the digital world are also reflected in the company’s share price. Shortly before the name change, the group briefly reached a market capitalization of US$1 trillion. Zuckerberg can only dream of it now. With a last trading price of 109.86 US dollars, the market value of the group is still 291.31 billion US dollars (at the closing price on November 121, 2022). In one year, the Meta share has already lost 67.21% of its value.

Meta has “drifted to the land of excess”

Brad Gerstner, CEO of Altimeter Capital, apparently does not want to accept the new price cut anymore. At the end of the second quarter, the investment company held 2.458 million shares of the IT group. The rigid adherence to the Metaverse has long been a thorn in the side of the main shareholder. In an open letter to Zuckerberg, Gerstner wrote that the Metas project was underpinned by “continued investment in a product-driven future and the mission to make the world more open and connected,” but that the group had wandered off course. “Like many other companies in a zero-cost world, Meta has drifted into the land of excess – too many people, too many ideas, too little urgency. This lack of focus and fitness is masked when growth is easy but deadly, when growth slows down and technology changes,” the Altimeter boss warned.

Loss of investor confidence

Meta increased spending, but at the same time investor confidence was lost. “The conventional wisdom – press and investor – is that the core business hit a wall last fall. As a result, the team rushed to swing the company to the Metaverse – including a The company’s surprise name change to Meta,” Gerstner continued. “Worse, this skepticism seemed to be confirmed by an almost immediate and significant downturn in financial results and continued underperformance in 2022.” The investor sees the fact that this calculation has not worked confirmed by the weakness in the price of the action.

necessary measures

In order to return to its core competencies and at the same time regain the confidence of investors, employees and the technology industry, Meta must achieve three goals: personnel costs must be reduced by 20%, annual investments by at least US$5 billion. to US$25 billion – Dollars will be reduced and spending on Metaverse technology will be capped at a maximum of $5 billion per year. If Meta implemented these measures, the company’s free cash flow could be increased by at least $20 billion in 2023, according to the large investor’s estimate. The Metas share price would also benefit.

Confusion of metaverse tendencies

Gerstner sees the main problem with the hype surrounding Metaverse’s Metaverse efforts that the subject matter is attracting too much attention and confusion, which is certainly also due to the band’s name change. This gives the impression that the company is entirely focused on Metaverse technology, which does not correspond to reality. What’s more, according to the head of the investment firm, the majority of people have no idea what the Metaverse concept actually means – a point of criticism that Apple CEO Tim Cook also recently voiced. “If the company invested $1-2 billion a year in this project, this confusion might not even be a problem. It would just do research and development and the investors would focus on the core business and breakthroughs in the industry. Focus on AI,” Gerstner stressed. “Instead, the company announced investments of $10 billion to $15 billion a year in a Metaverse project that is largely AR/ VR/immersive 3D/Horizon World and it may take 10 years to see the results.”

Writing finanzen.ch

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