It's been a tough few weeks for Meta, the parent company of Facebook, Instagram, and WhatsApp. The company announced its first-ever drop in quarterly revenue on the same day the FTC announced it was suing to block the company's attempt to purchase Within, maker of the popular Supernatural VR app.
Before that, CEO Mark Zuckerberg faced criticism for telling employees that some of them should probably quit. Then, the company announced that starting Monday, it is raising the price of the Quest 2 by $100. It's still the same VR headset, with the same hardware and software. If you bought one last week, it will function exactly the same as it does now that it costs more. Nothing else has changed.
Well, to be fair, one other thing has changed. I don't think it's a coincidence that August is when Zuckerberg has said you will no longer have to log in with your Facebook account.
That may not sound like a big deal, but it means Meta is losing out on all of the data it might collect about your activity and app usage in VR. That's data it would otherwise use to show you personalized ads elsewhere.
It looks like $100 is the value to Meta of using your data on the Quest 2. Meta has been selling the Quest 2 at a loss and making it up on the backend. That's pretty common for gaming consoles, though those usually make it up by taking a cut of game sales.
I'm sure that's partially true for Meta, which does have an Oculus Store, but the company's primary business is advertising. The company makes up for the loss by tracking your activity and using it to inform the personalized advertising you are shown--on Facebook, and elsewhere. Or, it used to. Now, like the rest of Meta, it's just losing money, something the company simply can't afford right now.
Granted, Meta has sold a lot of Quest headsets. The Quest 2 has long been the best and most popular VR headset you can buy, and not by a little, outselling Microsoft's Xbox gaming console. But Meta seems like it suddenly realized that building the metaverse is expensive, and it needs all the money it can get.
It's interesting that the announcement says the move is so that the company can "continue investing in moving the VR industry forward in the long term." During the company's earnings call last week, Zuckerberg said more about the "long term:"
I still believe that these projects are important. But given the more recent revenue trajectory that we're seeing, we are slowing the pace of these investments and pushing some expenses that would have come in the next year or two off to a somewhat longer time line. And given the continued trends, this is even more of a focus now than it was last quarter. Our plan is to steadily reduce headcount growth over the next year.
That quote is pretty revealing. Zuckerberg had said Meta planned to spend $10 billion a year to build the metaverse, but now says the company is "slowing the pace of these investments and pushing some expenses that would have come in the next year or two off to a somewhat longer timeline."
I think it's pretty clear this is a sign the metaverse isn't coming any time soon. Why? Because, if you wanted people to get on board with the metaverse, you'd want as many people as possible to be buying your VR headsets now before the competition figures it out. You'd be giving them away for free if you could.
On the other hand, if you raise the price of something by 25 to 33 percent, fewer people are going to buy it. That's just simple economics. The fact that Meta isn't trying to sell as many as it can--even at a loss--seems like a sign that overall the metaverse isn't going very well.
Betting your entire business on a future version of the internet that most people don't understand or aren't sure they want is both expensive and risky. The $10 billion the company has funneled into Reality Labs--the division responsible for building the metaverse--happens to be the same amount of money Meta says it lost due to Apple's App Tracking Transparency feature. Now, the fact that it's pushing off spending on its bet-the-company project makes it pretty clear it isn't happening any time soon, if ever.