Mark Zuckerberg’s Reality Labs division has lost $40 billion since 2021, but that won’t stop Meta from plowing even more money into the project.
The revelations came with the release of Meta’s second-quarter results for 2023.
The end of the beginning
Meta announced its second quarter result on Tuesday, July 25, reporting growth in a number of key areas. Company revenues increased by 11% when compared to the same quarter last year.
The market reacted positively to Meta’s latest figures. The U.S. market closed on Friday with Meta Platforms Inc. stocks up by over 10% over the 5-day period to $325.48.
The results seem to validate Mark Zuckerberg’s cost-cutting strategy through 2023. Thousand of Meta workers have lost their jobs this year thanks to the plan known as the “year of efficiency.”
Some areas of the company are more efficient than others, however. Workers inside most areas of Meta have very little job safety, but those in Reality Labs – its metaverse division – enjoy protected status.
Mark Zuckerberg’s bet on the metaverse has now cost the company $40 billion since 2021, and it isn’t set to make a profit at any point in the near future.
As Zuckerberg acknowledged to investors during Meta’s quarterly report call, the metaverse is the company’s long-term bet. The implication is that Meta and Zuckerberg are by no means at the end of their metaverse spending spree.
Reality Labs hemorrhages money
In the last quarter, Meta’s Reality Labs reported sales of $276 million. This is down from $452 million in the same quarter of last year.
This against losses of $3.7 billion for this quarter. This represents a gaping chasm of unprofitability. The division spends far more than any revenues it can hope to generate in the short to medium term.
Last fall, the company released an investor note setting out its intention to reduce yearly expenditure to $5 billion per year.
In 2022, the division lost $13.7 billion. Judging by quarterly losses thus far, the division is more likely to repeat the feat than come anywhere close to its optimistic $5 billion cap.
Meta said, “for Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem.”
While Reality Labs was receiving a sizeable chunk of Meta’s expenditure, the rest of the company was also spending money, despite Meta’s claims of frugality in 2023.
Costs and expenses rose by 10% year-over-year for the quarter to $22.61 billion. This included legal expenses of $1.87 billion and “restructuring charges” of $780 million – otherwise known as redundancy packages.
Meta Q2 results at a glance
- Daily active people (DAP) of 3.07 billion, up by 7% year-over-year (all platforms).
- Facebook daily active users (DAU) of 2.06 billion, up by 5% year-over-year.
- Ad impressions up by 34% year-over-year.
- The average price per advert decreased by 16% year-over-year.
- Company revenues of $32 billion, increased by 11% year-over-year
- Company costs increased to $22.61 billion, an increase of 10% year-over-year.
- Capital expenditures of $6.35 billion for the quarter were also incurred.
Year-over-year means the current figures are being compared to the same period of time in the previous year.
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