For years, one of Facebook’s biggest problems has been its refusal to acknowledge how hated it is by the public. Users can keep their accounts open, but goodwill is rare. A stock sale made it harder to ignore. But don’t count Mark Zuckerberg just yet.
Let’s get rid of the bad news first. Facebook, now called Meta, is the worst performing Big Tech stock of 2022. The stock price is down 41% this year, a bigger drop than Apple, Alphabet, Microsoft or Amazon. In April, the market valued Meta at 14 times expected earnings, a record high. A rare drop in user numbers and slowing sales growth has investors wondering if the massive advertising business is running out of steam.
But Zuckerberg has form when it comes to defying expectations. In 2009, following the financial crisis, he swapped his signature hoodie for a suit and tie to show how seriously he took the business. After a botched listing in 2012, it better managed investor expectations by under-promising and over-delivering. Now he must learn to sell his vision of the future.
Zuckerberg is one of the latest Big Tech founders turned leaders. He retains absolute control of the company through shares with majority voting rights. This gives it the ability to make drastic decisions that other companies might be hesitant to execute. Is the Facebook brand toxic? Change the name to Meta. User growth stagnates and everyone is watching TikToks? Go all in the metaverse.
Facebook’s rebranding not only successfully deflected attention from whistleblowers’ accusations about security, it also made the metaverse a global topic of conversation. But it’s still unclear what Zuckerberg wants this metaverse to be. Is it a place we visit or a world we inhabit full time? Will it replace existing Meta revenue or increase it?
Zuckerberg lacks the appeal of Elon Musk, whose Twitter musings on the future of electric cars, life on Mars and free speech can channel billions of dollars in investment and rule the news world. On Facebook, Zuckerberg may have more followers than Musk on Twitter, but his posts don’t get the same attention. The Metaverse is also a technologically challenging project. The visual effects are unrealistic and the headsets are bulky. Tying them up means shutting down everything else. No need to check your phone or walk around at the same time.
What works in Meta’s favor is the lack of exciting consumer tech elsewhere. I’m old enough to remember when friends would drag you around to admire their colorful iMacs. What is the equivalent today? The new smartphones are just sleeker versions of the latest ones. Self-driving cars aren’t for sale yet. The answer could be virtual reality.
I have a first hand example. This year, my dad bought a VR headset from Meta. It has since been taken to family parties, cafes, neighbors’ houses and the golf course so everyone can try it. He uses it every day, looking at the swirling graphics on a meditation app. Its only complaint is that most apps are games. When there is more to do with a VR headset, it will.
Helmets are not yet mainstream, which may explain why interest is still limited. This year, National Research Group surveyed 2,500 US consumers about virtual reality. Only a third were excited about its potential. But that number could be higher if more people try it. Of those who did, 86% had a positive experience. It might also make them more attracted to Meta.
Still, it is reasonable to ask why the revolution is taking so long. Zuckerberg bought VR game company Oculus in 2014. Sales are still low. Data from International Data Corporation revealed that although Meta’s $299 Quest 2 is the most popular headset on the market, it sold less than 9 million units last year.
Project Cambria, Meta’s codename for a mixed reality headset, may find a wider audience. Mixed reality superimposes digital images onto the real world, making it more convenient to experience virtual reality without tripping over your shoes. But this helmet, expected later this year, will also be more expensive.
Meta is caught between wanting to bring affordable headsets to market as soon as possible and spending more time and money working on the technology that will get users hooked. Reality Labs, the company’s metaverse division, makes up just 2.5% of total revenue, but lost $3 billion in three months this year.
To keep up the investment pace, Zuckerberg needs to find a better way to explain his dream. Truly immersive virtual reality is an expensive and speculative project that may not bear fruit for years to come. Again, this is exactly what Silicon Valley was created for.