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Meta’s Q2 results showed us that Mark Zuckerberg’s vision of the metaverse is still very expensive. And its losses in its VR division hit $2.8 billion in the second quarter, even as sales of virtual reality hardware and software continue to grow.
Meta has started breaking down its results from its Reality Labs division, (formerly known as Facebook’s Oculus division) to give investors an idea of how much it’s investing in the next version of the internet, or the metaverse, the universe of the virtual worlds that are all interconnected, as in novels like Snow Crash and Ready Player One.
The company signaled some bad news (at least for VR software companies) yesterday when it said it would raise the prices of its Meta Quest 2 VR headsets by $100 each on August 1st. It is also increasing the prices of peripheral products.
Meta Reality Labs generated revenue of $452 million in the second quarter ended June 30, up from $305 million a year ago and $695 million in the first quarter. The loss in the quarter was $2.8 billion in the second quarter, compared with a loss of $2.4 billion a year earlier and $2.96 billion in the first quarter.
Global net income was $6.69 billion on revenue of $28.8 billion in the second quarter, compared to net income of $10.4 billion on revenue of $29.1 billion a year earlier. Analysts had expected net income of $7.03 billion, up from $28.9 billion. Meta’s daily active users were 1.97 billion, up 3% from a year ago. Monthly, Meta’s platforms reach more than three billion people.
“The metaverse is a massive opportunity for a number of reasons,” Zuckerberg said on the analyst call. “It enables a deeper social experience where you feel a realistic sense of presence with other people no matter what you’re doing,” whether it’s gaming or meetings.
He said the company is spending money to build it in a way that would be the best possible platform, without the limitations that “our competitors put on us,” namely Apple and their fees. Zuckerberg said the metaverse could unlock hundreds of billions or trillions of dollars over time.
He said it was obviously very expensive, but the metaverse will be important to the way we live and he’s excited to play a part in its creation.
He said the company plans to release a web version of its Horizon social metaverse platform later this year, and the company is hearing good things about the Project Cambria hardware coming later this year.
As for the forecast, Meta said it expects Reality Labs revenue to be lower in the third quarter compared to the second quarter. Rising prices probably won’t help that.
Meta CEO Mark Zuckerberg shows off the Holocake 2 VR prototype.
Zuckerberg noted that there are “probably a lot of people in the company who shouldn’t be here” in a sign that losses in VR and a slowdown in the broader business are starting to hurt. The company has instituted hiring freezes amid lower ad revenue due to Apple’s crackdown on privacy. And TikTok has become very competitive against Meta in the short video market. In this regard, Meta is struggling with its short Reels videos.
“It was good to see a positive trajectory in our engagement trends this quarter from products like Reels and our AI investments,” Zuckerberg said in a statement. “We’re putting more energy and focus around our company’s key priorities that unlock both short- and long-term opportunities for Meta and the people and businesses that use our services.”
Starting in August, Meta Quest 2 will cost $400 and $500 for the 128GB and 256GB versions respectively. And for a limited time, every new headset purchase will include an offer to download the popular VR beat game Beat Saber at no additional cost. Alongside these changes, Meta will also increase the prices of Meta Quest 2 accessories and refurbished units.
The workforce was 83,553, compared with 77,805 on March 31. The figure of 83,553 is 32% more than a year ago. In an earnings call, Zuckerberg said on the call that the economic downturn and its potential impact on advertising looks worse than it did a quarter ago. And he said the goal is to steadily reduce the number of employees over the next year.
“This is a period that demands more intensity and I hope to do more with fewer resources,” he said.
But the company said it is not backing down on its optimism around virtual reality. Zuckerberg said the company is riding the technology waves of AI and the metaverse.
In other news, the Federal Trade Commission sued to block Meta’s proposed acquisition of VR Within, the maker of subscription VR workout app Supernatural.
Colin Sebastian, an analyst at RW Baird, said in an email to GamesBeat that Zuckerberg is convinced that the next era of computing will be virtual reality and the metaverse, which for Meta represents a potential thread but also a huge opportunity.
“I don’t know how much it cost Apple to specify, design, build and release the first iPhone and the first mobile operating system (iOS), but Steve Jobs had the vision and resources to lead us into the wave of mobile computing Sebastian said. said “Mark certainly has the resources, but we don’t really know yet if he has the right vision or if his gamble will pay off in terms of commercial success. Having said that, we like companies that take risks, rely on the best engineering talent and are conditioned to innovate”.
He pointed out that this is how Google can continue to grow even though it is already the largest media and advertising company in the world.
“Right now, during a macro recession, it’s a difficult trade-off, as investors prefer companies that preserve margins and cash flow, rather than invest in speculative projects,” Sebastian said. “It’s worth a shot, given how high the stakes are, but we’d also like Reality Labs to take responsibility for spending, meeting certain milestones, for example.”
Wall of Meta virtual reality headset prototypes.
Wedbush analyst Michael Pachter said in an email to GamesBeat, “They clearly think the metaverse is going to be huge and they clearly think they’re going to dominate. I agree with the former, but the latter is hard to predict as it could be like AOL trying to dominate the Internet. However, if they don’t invest, they have no chance of winning.”
Oculus’ mobile app has seen just over 20 million installs worldwide from the App Store and Google Play to date, according to measurement firm Sensor Tower.
The app recorded the most installs in a single month when it reached approximately 2.8 million in December 2021. This contributed to the increase in quarterly installs in the fourth quarter of 2021 that can be seen in the following table. Since that record-breaking quarter, Oculus’ mobile app has seen a decline in adoption from one quarter to the next; however, it still exceeds installations from a year ago, Sensor Tower said.
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