Mark Zuckerberg has bet the house on the metaverse, a next-level evolution of the internet in which participants interact as avatars in virtual spaces instead of relying on a clunky mouse and screen.
These sci-fi ideals have thus far failed to translate into any appreciable ad revenues for the social media network, despite a ‘terrifying’ $100bn investment in the metaverse – prompting analysts to plead for the firm to get back to basics.
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Leading calls for Meta to return to its bread and butter, Vlad Komanicky, chief executive officer and co-founder at marketing advisory firm Alchemists, said: “Meta continues to be in a challenging position and has historically been among the most affected by the decline in revenues in traditional paid social media channels and by growing competition (ie TikTok). Moreover, tech experts have been shocked at its $100bn metaverse spend, but virtual reality (VR) technology has yet to gain significant traction with consumers.
“It’s time to focus on efficiency, cutting out inefficiencies and realistically rethinking investments into new ventures. A huge priority for Meta will be to look inward at its operating model, structure and capabilities and whether they are the right ones for the unstable and unpredictable economic climate ahead of us.”
Having become accustomed to seemingly endless growth, Zuckerberg conceded that his firm was facing “near-term challenges” before the promised land of the metaverse could be reached, in light of a 4% contraction in sales to $27.7bn and a halving of profits.
In response, Zuckerberg has suggested Meta will become a “smaller organization” next year, heavily implying a round of job cuts and efficiency savings are in the offing.
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Echoing calls for a change in tack, principal analyst at Insider Intelligence Debra Aho Williamson stated: “Mark Zuckerberg’s decision to focus his company on the future promise of the metaverse took his attention away from the unfortunate realities of today: Meta is under incredible pressure from weakening worldwide economic conditions, challenges with Apple’s AppTrackingTransparency policy and competition from other companies, including TikTok, for users and revenue.
“While Alphabet’s poor Q3 results show that no digital publisher is immune to the worsening economy, Meta would benefit from less priority on the metaverse and more on fixing its core business.”
Meta, together with Google, Amazon and Apple, accounts for 75% of digital ad revenue, but a shrinking market is forcing the tech quartet to rethink their business strategies to reflect a recessionary environment.
Investor confidence in Meta had already come off the boil after the company reported a drop in daily users for the first time in February.