ZUCKERBERG GIVES UP: Zuckerberg has finally given up on
the Metaverse. To most of you, this probably isn’t that surprising. Within just the past two years,
the Metaverse has lost Meta $24 billion. But, despite the hefty losses, the memes,
and the lack luster adoption rates, it seemed like Zuckerberg was willing to push forward no
matter what. He was ready to bet a $100 billion on the Metaverse over the next couple of years,
so there was plenty of headroom left. But, it seems like there was one factor that was big
enough to scare him away from the Metaverse: shareholders. Zuckerberg technically has over
50% voting control at Meta, so he’s allowed to do whatever he wants and no one can fire him. But,
that doesn't mean that he can do whatever he wants and the stock will perform well. If investors
don’t believe in the future of the company, they’re gonna dump the stock in masses and that’s
exactly whats been happening at Meta. Between late 2021 and late 2022, Meta stock plummeted an eye
watering 77%. This translates to a market cap loss of wait for it $800 billion. It looks like this is
exactly the reality check that Zuckerberg needed as he has completely shifted his tone on the
Metaverse. Of course, he hasn’t publicly denounced the Metaverse or admitted that it’s a failure,
but actions speak louder than words. Within the past 6 months, Meta has laid of a total of
21,000 employees. This equates to about 25% of their total workforce and I think you can guess
which department was affected the most. Also, the layoffs may not even be done yet. There’s rumors
that Meta may have one last round of layoffs in May, so by the time you’re watching, Meta may
have laid off another 5 to 10,000 employees. This would effectively bring Meta’s employee count down
to pre pandemic pre metaverse levels. Zuckerberg has also completely stopped talking about the
Metaverse. I wonder why. Unsurprisingly, this has allowed Meta to destroy their recent earnings
report and that’s despite still paying mountains in severance. Within the next 6 months or so as
the severance phases out, Meta will not only be larger than ever but they will also be more
efficient than ever. Investors couldn’t ask for anything more and they’ve already started to price
in this scenario. Within just the past 6 months, Meta stock has bounced back an impressive 200%.
This has allowed Meta to reclaim their spot as a fortune 10 company and for Zuckerberg to add
a cool $42 billion onto his fortune just this year alone. So, here’s the story of
Zuckerberg’s insane gamble with the Metaverse and how he managed to walk away stronger than ever.
A FAILING CORE:
Taking a look back, the story of the Metaverse dates back nearly 10 years at this point to
2014. At the time, Facebook would acquire Oculus for $2 billion which allowed them to take their
first steps into the world of virtual reality. Facebook wasn’t alone in this venture as a bunch
of big tech companies were also interested in this future. Samsung and Sony were also hard
at work creating their own VR products, and who could forget about Google Cardboard. But,
over the years, most of these companies have scaled back their VR efforts or straight up
discontinued the projects altogether. They could all see what we saw. The tech just wasn’t ready
for mass adoption. But, despite the early red flags, Facebook would not only lean into VR
but Mark would go onto to bet the entire future of the company on it, so what happened? Well,
a lot of Mark’s choices make a lot more sense when its contextualized with the state of Facebook as a
whole. By the second half of the 2010s, Zuckerberg had come to the realization that social media is
extremely fickle. There’s always a new kid on the block that’s soaking up all the attention. First
there was Friendster, then MySpace, then Facebook, then Instagram, then Snapchat, then TikTok,
and now potentially BeReal. So, the reality was that it was just a matter of time until
Facebook was replaced. At first, Facebook tried to address this by just buying out the new kid
for stupid sums of money. He bought Instagram for $1 billion and Whatsapp for $19 billion,
but flexing his wealth only got him so far. Pretty soon, the people that he was trying to buy out
started to reject his deals. Snapchat was likely the first notable example, rejecting a $3 billion
buyout from Facebook. Realizing that he couldn’t just buyout everyone, Mark naturally shifted his
strategy to copying everyone. At the end of 2012, for example, Facebook launched Poke which was a
shameless rip off of Snapchat. You probably don’t remember this though as it was a massive failure.
Learning from this Facebook would stop trying to launch new apps. Instead, they would just
implement popular features into their existing apps. For example, they implemented Stories and
Reels into Instagram. But, while these features were decently successful, they by no means stopped
Snapchat or TikTok from succeeding. So, by the late 2010s, Mark came to the realization that he
couldn’t just buy or copy his way into stability. The only way to achieve stability was to shift to
a more stable industry. His dream with Facebook was always to build a social highway and to use
advertisers as toll booths. The hole in this plan is that when it comes to social highways
people are always moving cities. What Mark really wanted was to control something like the internet,
but it was obviously impossible for Facebook to takeover the internet itself in the late
2010s. If they wanted to control something so large, the only option was to get in early into
the next internet. And this brings us into Mark’s obsession with virtual reality or the Metaverse.
A HOPELESS GAMBLE:
Things didn’t start off hopeless for the Metaverse; in fact, they started off pretty
bright actually. Oculus was by far the most respected player within the VR scene and hardcore
gamers loved their products, but there was one major limiting factor: cost. Oculus headsets were
simply unaffordable for the masses. The Oculus Rift came in at $600 which in itself isn’t cheap,
but that was by no means the only expense. The Rift was a tethered headset meaning that it had
to be connected to a PC to function. Of course, you could connect the headset to your beaten up
laptop, but if you wanted any sort of meaningful VR experience, you had to buy a multi thousand
dollar PC which just wasn’t practical for the average joe. So, Zuckerberg decided to address
this concern head on with the Meta Quest 2 which came in at a mere $300 to $400, no PC required.
Suddenly, the price of VR was comparable to that of a gaming console; in fact,
it was cheaper than most gaming consoles. The main reason for this was that Meta was taking massive
losses on these units, but that was ok. They just wanted everyone to buy and use the darn thing,
and they could figure out how to monetize later. It seemed like their plan was playing
out perfectly. Given the hype around VR and the relatively affordable price of the Meta Quest 2,
people were buying it in the masses. In fact, Meta has sold nearly 20 million of these headsets, but
there was just one teensy tiny little problem. No one was using the headsets. People would buy it,
try it out for a few days, and then use it as a dust collector indefinitely. Why you ask? Well,
the biggest reason is simply that the experience just sucks. The entire point of VR is to have an
immersive almost real life experience, and the only way to do that is use powerful Nvidia GPUs
paired with airplane jet engines as coolers. When you try to do the same thing with an iPhone chip
for $400, well, a 360 degree Mii world is what you get. The hardware was so limited that Meta
couldn’t even produce legs for your avatars much less make them look realistic. In fact,
they couldn’t even produce legs for demonstration purposes. They would end up cheating using pre
rendered animations. And don’t even get me started on the enterprise side of things. Mark was selling
the Metaverse as a way for business professionals to conduct more authentic virtual meetings that
felt like real life. Not a bad idea in theory. But with graphics like this, these meetings by no
means felt professional and geniuine. If anything, they felt childish and out of place in a corporate
setting, not to mention expensive. Unsurprisingly, virtually every company has decided to stick with
Teams and Zoom. We should mention that after receiving all this negative feedback about
lack luster immersion, Meta would come out with a higher end headset called the Meta Quest Pro for
$1500. But, by the time this headset came out, the pros were already out and the reputation of
the Metaverse had already been tarnished. Not to mention, the pro wasn’t all the much better to
begin with. So, lets just say, the Meta Quest Pro wasn’t received very well and Meta would
end up slashing the price by $500 just 5 months after release marking the beginning of the end.
A NEW GAMBLE:
There’s really no way to sugar coat it. Meta is pulling back on the Metaverse
hard and it’s no wonder why. They’re far from producing the tech and experience they want,
developing the Metaverse is taking a massive toll on the company’s bottom line and stock price,
and the reputation of the Metaverse is beyond repair. Now of course, if you ask Zuckerberg,
he’ll tell you that they’re be no means ditching the Metaverse, but all of the evidence is against
this. For starters, Meta has laid off a quarter of their workforce. With a median salary of $300,000,
this is saving Facebook roughly $6.3 billion every year. Seems counterintuitive for someone
who's planning on investing a $100 billion into the Metaverse. But, likely the best evidence that
Meta is indeed moving away from the Metaverse is the fact that Zuckerberg has become obsessed with
something else: AI. According to Meta’s CTO, Andrew Bosworth, Mark, Meta’s chief product
officer, Chris Cox, and him are all spending most of their time working on AI and more specifically
generative AI. It seems that Mark has very much gotten caught up with the ChatGPT hype and he
wants to get a piece of the action. Meta has even announced their own large language model
called LLaMa and they’re currently working on releasing this to researchers. Bosworth has
also confirmed that they’re working on releasing a commercial AI product by the end of the year.
All of this may be a bit confusing. It seemed like Zuckerberg was super gung ho about the Metaverse,
so how did he pivot so quickly? Well, the reality is simply that Meta’s commitment to the Metaverse
was simply overhyped by the media. In fact, the Metaverse wasn’t even Zuckerberg’s first attempt
to pivot Facebook away from social media. Before he got obsessed with VR, Zuckerberg
was actually trying to build a space business. He was launching a bunch of solar powered drones and
atmospheric satellites with the goal of trying to create satellite based internet similar to
Starlink today. But, as he saw that this wasn’t picking up any steam and that SpaceX was gonna
do it themselves, Zuckerberg didn’t hesitate to kill off the program completely and switch to the
Metaverse. So, who’s to say that Zuckerberg isn’t willing to do the same thing with the Metaverse.
THE TRUTH ABOUT THE METAVERSE: Given
that the Metaverse was much more consumer oriented and futuristic than their space plan,
it garnered a lot more media attention, but for Facebook it was just another attempt to break
free from social media. By now though, it’s become clear that this path is not so viable and they’re
accordingly pulling back substantially. This isn’t to say that Meta is completely
ditching the Metaverse quite yet. They’re still pouring resources into the idea but they're by
no means adamant to sticking to just that. If they can get something else to work instead,
great! In the end, the bottomline is that Meta has become a mature social media company meaning
that they only have two paths forward. They can either go all in on social media,
optimize their operations, and become a dividend giant. Or, they can try to hit the next big thing.
With his performance over the past 6 months, Zuckerberg has made it clear
that he can achieve the former at any time within a matter of 12 months if he wants to.
But, what he really wants is the latter. He wants is to grow Meta to the next magnitude and the only
way to do that is to hit a grand slam. He took a few swings at the Metaverse and it looks like he
struck out. But, being only 38 years old with majority control over the 8th largest company
in the world, I assure you, he has a lot of swings left. So, while people love mocking the Metaverse,
it’s Zuckerberg that’s getting the last laugh. Are you a fan of the Metaverse? Comment that down
below. Also, drop a like if you think people would be better off focusing on their own lives instead
of critiquing others. And of course, consider checking out our discord community to suggest
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