Just as Meta is making what The Wall Street Journal called “its most ambitious attempt yet to prove that its metaverse aspiration actually has some legs,” with a reveal of its latest efforts in virtual reality slated for next week, the social media company is in the midst of extensive cost cutting, including closing offices, freezing hiring and layoffs. And its stock has lost 58% of its value over the last 12 months, making it the 10th worst performer on the S&P 500 in that time, the Journal noted. In Friday morning trading, Meta Platforms shares were down 2.5% at $135.57.
These moves follow a series of scandal relating to privacy and politics, combined with a slowing economy and slumping online advertising spending to create a series of stumbling blocks for the Facebook and Instagram parent, which changed its name to Meta last year.
The company is expected to introduce a new high-end virtual reality headset at its “Meta Connect” conference that starts Tuesday. CEO Mark Zuckerberg has described the set as being designed for work, and suggested it could “eventually replace” a work laptop.
Meta will seek to build on the success of its Quest 2 VR headset, which is mainly for videogaming and has sold nearly 8.8 million units in the last year, according to the Journal. But even gamers are not particularly enthused about VR; less than 3% of total revenue generated by console games last year came from VR games.
Reality Labs, the unit of Meta that includes VR, made up just 2% of the company’s revenue last year, the Journal reported, and lost nearly $5.8 billion in the first six months of 2022.
That leaves Meta relying on advertising during a time of general slowdown in online spending, and has led to the company’s belt tightening. The Journal previously reported that it is trying to trim spending by 10%, and it is also reducing how much office space it occupies with many staffers working from home.
Even so, Meta is still planning to spend $34 billion this year on capital expenses, double its average over the past three years, according to the Journal, at a time when its profit margins are shrinking.
Even if Meta succeeds in selling the metaverse concept to the masses, the business models there remain uncertain, especially at a time when governments around the world are taking a closer look a the company, the Journal reported, adding, “The former Facebook’s real world will long haunt its virtual one.”
