Meta Platforms is beginning to look like two companies—a social-media platform and a digital-reality platform—and investors are growing tired of it.
- Some analysts are beginning to suggest that Meta CEO Mark Zuckerberg’s vision of the metaverse is being pitched to the wrong audience.
- Meta’s social-media platforms Facebook and Instagram are money-making operations, but Zuckerberg’s Reality Labs is bleeding money—and he says that’s likely to continue.
- Taking a gamble on a new investment isn’t unusual for a company like Meta, but when the company is implementing layoffs and losing revenue, investors are questioning whether or not the metaverse is worth it.
- Meta’s stock has fallen 67% so far this year.
Why it’s news
Meta recently announced mass layoffs—nearly 11,000 staff members. Compared to rival tech companies like Alphabet and Pinterest, shareholders value Meta at nearly half of its peers.
Some shareholders like Altimeter Capital Management have asked Meta to reduce its Reality Labs by at least half. Analysts and Wall Street seem to doubt the success of the metaverse.
But there is another option for the metaverse’s survival. Venture-capital firm Greycroft’s board member Kamran Ansari suggested the possibility that Meta could divide itself into two separate companies.
“It’s very doable—you’ve seen companies split up and spin stuff off,” Ansari says.
If Reality Labs and Meta were two different entities, the experimental division could separate itself from some of Meta’s other struggles such as slow ad revenue and competition from TikTok.
Other major companies have taken this approach when it comes to high-risk investment. Elon Musk, for example, separated SpaceX from Tesla, and Jeff Bezos built Blue Origin outside of Amazon.
Meta is facing a difficult economy, but so are all other major tech companies. If it is free from the extra cost of Reality Labs, the company could better weather the economic storm.
Backing up a bit
In a conference this week, New York University Professor Scott Galloway predicted that Mark Zuckerberg’s metaverse would ultimately fail.
Galloway is hardly the first to suggest the metaverse’s failure—but he did point out more obscure failures in the project.
Meta’s VR headset is difficult to use, Galloway claims, and the metaverse is just “a 3D rendering of the World Wide Web.”
Meta is under increasing scrutiny for its focus on developing the metaverse—especially after reporting yet another drop in earnings.
Most major tech companies are floundering this year and Zuckerberg seems to be placing all his bets on the metaverse.
Galloway criticized the overall concept of the metaverse, noting that a 3D model of the internet isn’t all that revolutionary.