The venture of building Metaverse cost more than a few thousand dollars and we know that. Facebook’s parent company has been named Meta and the world was shocked when Mark Zuckerberg first announced it.
Meta disclosed the figures and the financials for the very first time and the numbers aren’t impressive. The Reality Labs fourth quarter 2021’s earnings were stated and made public on Wednesday.
The public has been waiting long to know the performance report of the Metaverse. CEO Mark Zuckerberg wants to draw revenues from the related hardware namely Meta Quest virtual reality headset but there are still many flaws that need to be addressed if they are planning to be present in the long run.
Metaverse Is Running at a Loss
Reality Labs has reported the huge loss that the company has undergone in 2021 alone. $10 billion were in loss and the numbers keep increasing over the years.
If you look into the figures of 2019, $4.5 billion was the Net Loss after the company had spent $501 million in revenue. For 2020, they had a Net Loss of $6.62 billion on revenue of $1.14 billion. Now for the latest results, the numbers got more than doubled compared to 2019. The Net Loss for 2021 is $10.19 billion while spending a revenue of $2.27 billion.
The losses are so high that they can be aligned to the investment that the Facebook CEO was planning to make in the Reality Labs. If we have to hear the experts, they claim that the losses are going to be more this year. Even Meta’s CFO stated he is expecting to witness operating losses. He claimed it to “increase meaningfully” for the year 2022.
Meta couldn’t show their overall profitability due to the huge mess created by the losses. The company would have made around $56 billion in profits if Reality Labs weren’t involved.
Breakdown of the Losses
So, how did they create such a big fiasco? Let’s explain the incurred losses. In the fourth quarter of last year, Reality Labs lost a massive $3.3 billion. Alphabet’s Other Bets segment consists of projects where you can see self-driving cars, healthcare technology, and many more. The company also made a loss of $1.45 billion in addition to the previous losses.
The main question that arises is why is Meta continuing its spending spree even after such a drastic loss? According to the company’s CFO, $4.2 billion alone was spent on employee cost, items sold, and also in their extensive research and development process.
If you check its competitors like Roblox or Epic Games, the primary competitors of Metaverse, they are small just because they don’t have unlimited financial support. Reality Lab’s Financials allows spending a lot of money on these projects. As they have the financial capability, they are pulling all the strings to make it a success.
The executives claim that it might take 15 years to more to transform this vision into reality. Now, the investors may stick to them or just give up and pull off from the company.
Other than this, Metaverse’s shares dropped by 20% and Reality Labs had a part to play in it. So, even if there is a disappointment, Metaverse will continue but the audience is willing to see how long it can take to be the mogul.
Metaverse is making many dreams come true. But the ultimate goal of the company is to create a platform that will not only entertain the audiences but also bring profit. As the CFO said, we may also see a loss in the upcoming year but will that stop all of Metaverse’s operations? The answers can be many but only the company heads and investors can decide the future.