• High hopes for Metaverse trend
• Criticism of Meta Horizon Worlds is growing
• Major shareholder pleads for savings
metaverse trend
Metaverse was a hot topic last year. The “next generation of the Internet”, as the concept is also often called, should enable virtual worlds in which users can exchange information digitally. In addition to younger providers such as The Sandbox or Decentraland, some tech giants are also involved in the trend. The chip group NVIDIA, 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 virtual environments can be quickly simulated. The Metaverse companies also include – as the company name suggests – the Facebook parent Meta Platforms.
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Facebook becomes Meta Platforms
Company boss Mark Zuckerberg has such confidence in the digital world that he renamed the Facebook group to Meta Platforms last year. “The next platform will be even more immersive – an embodied internet where you dive into the experience and not just look at it. We call this the Metaverse and it will affect every product we build,” announced the CEO in October 2021 in a letter. “To show who we are and the future we want to build, I’m proud to announce that our company is now called Meta.” The group thus combines the applications Facebook, Instagram and WhatsApp, but also the Metaverse division under the new company name.
Metaverse has not been successful so far
The Zuckerberg company 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 over 10,000 worlds and experiences,” the company’s website says. However, the free app can only be used in combination with the VR headsets from the Meta Quest series. In the past, the relatively simple graphics of the VR game and simplified avatars, which previously had to do without a lower body, also caused criticism. In October, however, Zuckerberg announced some graphical improvements. For Paul Tassi from 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 debut virtual characters with legs, something has gone wrong,” said the tech expert.
Too expensive hardware
Along with the software updates, the Meta boss also announced new VR goggles – the Meta Quest Pro. While the Meta Quest 2 entry-level model, which is still available, starts at $399.99, the Pro version will cost at least $1,499.99, depending on the configuration. “Zuckerberg unveiled a $1,500 Oculus Pro headset, [das so viel kostet wie] a PS5, Xbox Series X and Quest 2 together,” Tassi quipped. “The whole problem with Mark Zuckerberg’s fascination with the metaverse is that he’s trying to impose a sci-fi reality long before the rest of society will or will needs it to actually exist. His take on an AR/VR-based metaverse remains a niche, not something for a trillion-dollar company to focus on.”
User numbers fall short of expectations
This assumption is supported by the low number of users of the service. As the company’s internal documents, which are available to the “Wall Street Journal”, show, Horizon Worlds is used by fewer than 200,000 members a month. Initially, Meta aimed to have 500,000 monthly active users, but later revised that number to 280,000. According to the newspaper’s report, the majority of users do not return to the application after the first month. The number of users has also been steadily declining since the spring. For comparison: Facebook, Instagram and WhatsApp together have an average of more than 3.5 billion users per month. “An empty world is a sad world,” the newspaper quoted from an internal meta-document.
Meta share under pressure since renaming
In the third quarter of 2022, Meta’s Reality Labs division, which develops the company’s Metaverse efforts, suffered an operating loss of approximately $3.7 billion. For the year, the minus is already 9.4 billion US dollars. Zuckerberg reckons the area’s losses could increase further in 2023. In response to the weak data, the group apparently wants to cut numerous jobs, as media reports said. According to the Wall Street Journal, several thousand employees fear for their jobs.
The problems that Meta has brought on with its focus on the digital world are also reflected in the company’s share price. Shortly before the renaming, the group briefly reached a market capitalization of one trillion US dollars. Zuckerberg can only dream of that now. With a last share price of 113.23 US dollars, the market value of the group is still 310.46 billion US dollars (as of the closing price on November 16, 2022). Within a year, the Meta share has already lost 66.34 percent of its value.
Meta has “drifted into the land of excess”
Brad Gerstner, CEO of Altimeter Capital, apparently no longer wants to accept the further fall in the price. At the end of the second quarter, the investment company held 2.458 million shares in the IT group. The rigid adherence to the Metaverse has been a thorn in the side of the major shareholder for a long time. In an open letter to Zuckerberg, Gerstner wrote that the Metas project was supported by “continuously investing in a product-oriented future and the mission of making the world more open and connected”, but that the group had lost its way. “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. That lack of focus and fitness is masked when growth is easy but deadly, when growth slows and technology changes,” the Altimeter boss warned.
Lost investor confidence
Meta has increased spending, but at the same time the confidence of investors has been lost. “The conventional wisdom – press and investor – is that the core business hit a wall last fall. As a result, the team hastily flipped the company towards the Metaverse – including a surprise renaming of the company to Meta,” Gerstner continued. “Worse, that skepticism appeared to be confirmed by an almost immediate and sizeable fallout in financial results and continued underperformance in 2022.” The investor sees the fact that this calculation did not work out confirmed by the weak share price.
measures required
In order to get back to its core competencies and at the same time regain the trust of investors, employees and the tech industry, Meta must meet three goals: Personnel costs should be reduced by 20 percent, annual investments by at least 5 billion US dollars to 25 billion US dollars -Dollars will be reduced and spending on Metaverse technology will be capped at a maximum of $5 billion per year. Should Meta implement these measures, the company’s free cash flow could be increased by at least $20 billion in 2023, according to the major investor’s estimate. The Metas share price would also benefit from this.
Metaverse trend confusion
Gerstner sees the main problem with the hype surrounding Meta’s Metaverse efforts that the topic brings too much attention and confusion, which is certainly also due to the renaming of the group. This gives the impression that the company is focusing entirely on the Metaverse technology, which does not correspond to reality. In addition, according to the head of the investment company, the majority of people are not at all clear what the Metaverse concept actually means – a point of criticism that Apple CEO Tim Cook also recently voiced. “If the company were investing $1 billion to $2 billion a year in this project, this confusion might not even be an issue. They would just be quietly doing research and development and investors would focus on the core business and breakthroughs in the industry Concentrate on AI,” emphasized Gerstner. “Instead, the company has announced investments of $10 billion to $15 billion per year in a Metaverse project that will be mostly AR/VR/immersive 3D/Horizon World and that it may take 10 years to see results.”
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