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Meta will slow spending on long-term projects like its metaverse initiative in the face of sluggish earnings. CEO Mark Zuckerberg said a persistent, interconnected online world is still years in the future.
The company, formerly Facebook, reported Wednesday its first-quarter revenue grew by 7% year over year, the slowest pace since the company first went public in 2012. As Meta's massive metaverse outlay was funded by high pandemic-era revenue gains, a deceleration has triggered a change in approach.
"With our current business growth levels, we are now planning to slow the pace of some of our investments," Zuckerberg said during the company's earnings call.
Meta's metaverse division, Reality Labs, saw its quarterly revenue increase from $534 million to $695 million year over year. However, the department still lost about $3 billion, compared with a $1.8 billion loss a year ago.
Tom Brannen, an analyst at OnConvergence, said it's a little disappointing to see Meta pull back spending, but the company must balance its immediate health against its long-term goals.
"What we wouldn't want to see is Zuckerberg just drive this car off the cliff in the name of the metaverse," he said.
Meta has been vocal in its ambitions to build the metaverse and immersive technologies like virtual reality and augmented reality to interact with it. The firm rebranded from Facebook last year to emphasize it focus on a metaverse economy that Constellation Research estimates could hit $21.7 trillion by 2030. However, Zuckerberg warned investors that it will take a long time to see a meaningful return on the money spent on Reality Labs.
"[We're] laying the groundwork for what I expect will be a very exciting 2030," he said. "There will be results along the way … but I do think this will be a longer cycle."
Part of that groundwork will be a high-end VR headset aimed at the enterprise, Zuckerberg said. Meta intends for the headset, code-named Project Cambria and set to launch later this year, to replace an employee's work laptop. The headset will have full-color video pass-through from its external cameras, so it can superimpose digital elements over a worker's real-life environment. Cambria will also track users' eyes and facial expressions to improve their immersion in the virtual environment.
The enterprise is part of the company's metaverse push. Last year, the company put a VR collaboration product, Horizon Workrooms, into beta. Workrooms is a virtual meeting room where employees can interact.
Meta wants to bolster the user base for its metaverse platform, Horizon, as well. The company will launch a web version of Horizon later this year, opening the platform to PC and mobile users. At present, people can access Horizon only through a VR headset.
By opening Horizon to PC and mobile users, Meta could vastly broaden the platform's audience, Brannen said. For example, Facebook users could hold virtual class reunions on Horizon, giving them a taste of the metaverse and enticing them to buy headsets to interact with the environment more fully.
"For non-gamers, [Horizon] is probably going to be the way they get in the metaverse," Brannen said.
Meta is wise to take the long view on VR, AR and the metaverse, said Jeremy Bailenson, founding director of Stanford University's Virtual Human Interaction Lab.
"For decades … thinkers in the VR space would boldly predict 'next year' will be the big one for VR," he said. "What we are seeing instead is a modest but steady increase each year … as opposed to a huge inflection point."
Mike Gleason is a reporter covering unified communications and collaboration tools. He previously covered communities in the MetroWest region of Massachusetts for the Milford Daily News, Walpole Times, Sharon Advocate and Medfield Press. He has also worked for newspapers in central Massachusetts and southwestern Vermont and served as a local editor for Patch. He can be found on Twitter at @MGleason_TT.