Newly Efficient Meta Will Continue to Focus on Metaverse

Newly Efficient Meta Will Continue to Focus on Metaverse

Stricter cost controls and a share buyback scheme will help Meta to continue investing significant sums in the metaverse.

Meta CEO Mark Zuckerberg is a strong believer that the metaverse is the future lynchpin of the organization, and its development budget continues to reflect that. In 2022 Reality Labs, the wing of the business focused most heavily on metaverse-related technologies, posted $13.7 billion in losses.

Keeping investors happy

The metaverse may be the long-term play for Zuckerberg and Meta, but in the short term, the company needs to keep investors happy. 

To that end “the Zuck” as he is commonly known in the halls of Meta headquarters, will pursue a corporate strategy of stricter cost controls across the business. Zuckerberg even went as far as to dub 2023 the “year of efficiency” during the company’s Fourth Quarter 2022 Results conference call on February 1.

“We closed last year with some difficult layoffs and restructuring some teams,” said Zuckerberg. “When we did this, I said clearly that this was the beginning of our focus on efficiency and not the end.”

The Meta chief stated that further efficiencies would be found by “flattening out [the organization] structure” and “removing some layers of middle management” suggesting there will be further layoffs at the firm in the near future. In November of last year, the company announced it would axe 11,000 staff, after previously hiring too aggressively.

For investors, lowering wage costs often leads to a more profitable company in the short term and an increased share valuation. To further warm the icy hearts of shareholders Zuckerberg announced a $40 billion share buyback scheme. Share buybacks reduce the number of shares in circulation, increasing the value of individual shareholders’ holdings.

In 2022 Meta’s market capitalization dropped from $936 billion to $392 billion. The decline in Meta’s fortunes is most often attributed to its metaverse strategy, ignoring other contributory factors such as macroeconomic conditions, overstaffing, and a change to Apple’s iOS privacy features which curtailed Meta’s advertising revenues.

Following the announcement of Meta’s intention to buy stocks the capitalization of the company has climbed to $487 billion.

Company’s metaverse priorities

The tone and focus of Zuckerberg’s recent public statements have invited speculation that the company is reversing course on its metaverse strategy. There is nothing to indicate that the company is contemplating any such reversal.

Like a good politician, Zuckerberg is now keen to sprinkle a little AI sugar in the Meta mixing bowl to help the metaverse go down. 

As Zuckerberg puts it, “Our priorities haven’t changed since last year. The two major technological waves driving our roadmap are AI today and over the longer term the metaverse.”

In the area of artificial intelligence Meta is now putting great stock in its AI discovery engine.

“Facebook and Instagram are shifting from being organized solely around people and accounts you follow to increasingly showing more relevant content recommended by our AI systems,” says Zuckerberg.

Meta argues that AI will lead to better conversions for advertisers combined with lower acquisition costs.

Zuckerberg proud

As a long-term strategy, the metaverse may pay off handsomely for Meta, but in the here and now there are still some kinks to be ironed out.

The Meta Quest Pro VR headset shipped in October of 2022 retailing for $1,500. Zuckerberg failed to quantify how well this product line was performing. Instead, the CEO simply stated, “I’m really proud of it.” 

The Zuck was far less elusive in other areas of the business. According to Zuckerberg, there are now over 200 apps on their VR devices that have made more than $1 million in revenue.

Image credits: Shutterstock, CC images, Midjourney, Unsplash.