The virtual reality (VR) and metaverse division of Meta, Reality Labs has registered its seventh consecutive quarter of losses, but its CEO, Mark Zuckerberg, remains firm in his decision to invest in this technologywhich he calls a “massive opportunity.”
During Meta’s second quarter earnings call on July 27, Zuckerberg acknowledged that those losses could continue for several more years until VR apps and its metaverse platform are mature enough to take advantage of the “massive opportunity” valued at “hundreds of billions of dollars.”.
“The Metaverse is a massive opportunity for a number of reasons. I now feel even more strongly that the development of these platforms will unlock hundreds of billions of dollars – if not trillions – over time.”
“Obviously, this is a company that is going to be very expensive for years to come,” Zuckerberg added. “I’m sure we’ll be glad we played a big part in its construction”.
Reality Labs’ extended operating loss was revealed in Meta’s second-quarter earnings report. These losses are not unusual for divisions in the research and development phase..
Reality Labs creates virtual reality and augmented reality (AR) apps to help Meta users connect through their various social platformsincluding the Metaverse, with the Oculus line of virtual reality headsets.
Adding to the losses, Reality Labs’ revenue has been trending down since 2021 and its operating margin has been trending down since 2020. The $11.1 billion revenue and 29% margin posted in the second quarter of 2022 are the lowest in the last seven quarters.
Reality Labs posted $2.9 billion loss in the first quarter.
Zuckerberg also noted that a “challenging macro environment” could be compounding losses..
He said that the economic situation is now worse than it was a quarter agoand his opinion is corroborated by the fact that the Federal Reserve raised interest rates by 0.75 percentage points for the second time in a row on July 27, before the Meta results call took place, adding:
“It appears that we have entered an economic downturn that will have a broad impact on the digital advertising business. In this environment, we are focused on making a long-term investment that positions us to come out stronger.”
Despite economic problems, Zuckerberg is confident that his company and its subsidiaries will emerge from the current economic downturn as “a stronger and more disciplined organization.”.
He attributed this confidence to the investments his company is currently making to ensure that it is able to remain a leader in an industry that may be undergoing a change to accommodate more Metaverse platforms.
For its part, The Federal Trade Commission (FTC) has filed a lawsuit against Meta alleging that the company intends to monopolize the entire Metaverse market. The suit claims that Meta’s moves within the space hamper innovation and “competitive rivalry” between US-based companies that want to create Metaverse platforms and applications.
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