According to latest earnings reports, Mark Zuckerberg has invested more than $36 billion in his failing Metaverse project since 2019. The CEO has since watched more than $30 billion of those funds vanish in a matter of months. The unsettling data follow a discouraging earnings report from the dominant social media platform, whose user base has been declining in recent years.
In contrast, Zuckerberg, whose wealth is heavily correlated with the value of his firm, has been negatively impacted by declining revenues, losing $88 billion of his net worth since 2021, when it was still a respectable $126 billion. The 38-year-old CEO, who famously launched the company’s crown jewel, Facebook, in 2004 while an undergrad at Harvard, had a meager net worth of about $38 billion as of this past weekend.
The New York-born billionaire’s brisk investment in his virtual reality project, which has been derided for its never-ending empty rooms and inability to draw customers, has drawn new questions in light of the quarter’s underwhelming results.
Financial records reveal that the executive has primarily staked the future of his business on the sputtering technology, investing tens of billions of dollars in the expectation that it could attract users away from TikTok and other platforms.
Due to the fact that the endeavor has mostly failed and resulted in losses that are crushing the company’s revenues, Reality Labs, the division that houses Facebook’s and metaverse’s resident VR units, has racked up billions of dollars in debt. In the fourth quarter of 2021, the same quarter that Reality Labs revealed its first-ever user decline, Meta started providing financial information for the company.
The damning financial reports show that since funding for the Metaverse started in earnest in 2019, Reality Labs has reported an operational loss of $30.7 billion, resulting in $5.3 billion in income for the year.
Reality Labs reported third-quarter earnings on Wednesday, which revealed additional losses of $9.4 billion in operating losses for the first nine months of 2022 alone. Top executives anticipate further losses as the project shows no signs of slowing down despite having encountered little to no success.
After the much awaited announcement of the figures, CFO David Wehner stated, “We do estimate that Reality Labs operating losses in 2023 will climb dramatically year over year.”
The company’s new Quest VR headset, which was just released, and the impact of the first full-year salary for employees employed in 2022 were cited by Zuckerberg as the “main drivers” of the losses and the alarming outcomes, respectively.
According to the financial filings, Reality Labs’ costs and expenses totaled $12.5 billion in 2021, despite the division only earning $2.3 billion in income during that time.
The data strongly suggests that investments for this year are likewise on course to surpass those for 2021, with lab expenditures and expenses rising to $10.8 billion within the first few months of 2022, a period during which the division reported only $1.4 billion in sales.
Meta ascribed the reduced sales to the earlier this month’s introduction of the Quest 2 VR headset, which the business plans to make up for in the upcoming months.
In addition, according to Wednesday’s financial release, Meta’s third-quarter operating margin fell sharply this year as a result of the company’s now well-known spending binge, from 36% in 2021 to only 20% this year.
Before accounting for the costs of taxes and interest, Zuckerberg’s company’s diminishing revenues were taken into account. At the end of 2021, Facebook was renamed Meta to reflect the company’s drive into the “Metaverse.”
The business, which had over 3 billion monthly active users at one point, has subsequently struggled with the rebrand but anticipates Reality Labs operating losses to “increase dramatically year-over-year” in 2023.
Following this, Zuckerberg was made to shoulder the brunt of the tech industry’s alleged poor start, losing more than $88 billion in only a few short months.
Additionally, in the fourth quarter of 2021, Meta recorded its first-ever year-over-year sales decline, a trend that has continued this year.
Additionally, Meta’s stock price has fallen a staggering 70.5 percent year-to-date, to less than $100, a level not reached since early 2016.
The tech sector as a whole is confronted with a number of difficulties as advertisers reevaluate their spending amid an impending recession and consider how to develop in a technology environment that has become somewhat stale in recent years.
According to Bloomberg, Meta is performing worse than its competitors. Its year-over-year decline is 57 percent, compared to 14 percent for Apple, 26 percent for Amazon, and 29 percent for Alphabet, the parent company of Google.
According to the CEO of Meta, who owns more than 350 million shares, almost all of Zuckerberg’s wealth is invested in the company’s stock.
With that stated, many of the company’s investors are allegedly worried about the CEO’s spending on the Metaverse, calling it too pricey for a concept that many still seem to be perplexing and largely unfinished.
In a letter to Meta CEO Mark Zuckerberg earlier this week, Brad Gerstner, the CEO of Meta shareholder Altimeter Capital, said that the company had “drifted into the region of excess” and had “too many employees, too many ideas, and too little urgency.”
As growth is quick and simple, this lack of focus and fitness is hidden, but it becomes fatal when growth slows and technology advances, according to Gerstner.
Additionally, according to Meta and Zuckerberg, revenues would continue to shrink during the current quarter, therefore proving that the decline would be a trend rather than an anomaly.
Zuckerberg stated in a statement that “the fundamentals are there for a return to stronger revenue growth, even though we face near-term headwinds on revenue.”
In the announcement, it was stated that “we are approaching 2023 with a focus on priority and efficiency that will enable us negotiate the current situation and emerge an even stronger organization.”
Meta also stated that, in contrast to last year’s double-digit employee increase, it anticipates staffing levels to remain around the same as in the current quarter.
As of September 30, the corporation employed roughly 87,000 people, a 28% increase from the previous year.