For years, one of Facebook’s biggest problems has been its refusal to acknowledge how much it is disliked by the public. Users might keep their accounts open but goodwill is in short supply. A sell-off in shares has made it harder to ignore. But don’t count Mark Zuckerberg out just yet.
Investors are not yet won over by the metaverse, but if Zuckerberg succeeds in selling his dream it could revive the company.Elaine Moore FT 2022
Let’s get the bad news out of the way first. Facebook, now called Meta, is the worst-performing Big Tech stock of 2022. The share price is down 41 per cent this year, a bigger drop than Apple, Alphabet, Microsoft or Amazon. In April, the market valued Meta at 14 times expected earnings — a record low. A rare dip in users and slowing sales growth has investors wondering if the gigantic advertising business is running out of steam.
But Zuckerberg has form when it comes to defying expectations. In 2009, in the wake of the financial crisis, he swapped his signature hoodie for a suit and tie to signal how seriously he took the business. After a botched market listing in 2012 he got better at managing investor expectations by underpromising and overdelivering. Now he has to learn how to sell his vision of the future.
Zuckerberg is one of Big Tech’s last founders turned leaders. He retains absolute control over the company thanks to shares with majority voting rights. That gives him the ability to make sweeping decisions other companies might hesitate to execute. Facebook’s brand is toxic? Change the name to Meta. User growth is stalling and everybody’s watching TikToks? Go all in on the metaverse.
Facebook’s rebrand not only managed to drag attention away from whistleblower accusations about safety, it made the metaverse into a global topic of conversation. But it is still not clear what Zuckerberg wants that metaverse to be. Is it somewhere we visit or a world we inhabit full time? Will it replace Meta’s existing revenue or expand it?
Zuckerberg lacks the allure of Elon Musk, whose Twitter musings on the future of electric cars, life on Mars and free speech can channel billions of dollars of investment and lead global news. On Facebook, Zuckerberg may have more followers than Musk has on Twitter, but his posts do not generate the same attention. The metaverse is a technologically difficult project too. Visual effects are not lifelike and headsets are bulky. Strapping them on means shutting everything else out. No checking your phone or going for a walk at the same time.
What works in Meta’s favour is the lack of exciting consumer tech elsewhere. I’m old enough to remember when friends would drag you over to admire their colourful iMacs. What is today’s equivalent? New smartphones are just slicker versions of the last. Self-driving cars are not yet for sale. 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, coffee shops, neighbour’s houses and the golf course so that everyone can try it out. He uses it every day, watching the swirling graphics on a meditation app. His only complaint is that most apps are games. When there is more to do with a VR headset, he’ll do it.
The headsets are not yet mainstream, which may be why interest is still limited. This year, National Research Group interviewed 2,500 US consumers about virtual reality. Only one-third were excited about its potential. But that figure might be higher if more people tried it. Of those who did, 86 per cent had a positive experience. That could well make them feel more attracted to Meta too.
Still, it’s reasonable to ask why the revolution is taking so long. Zuckerberg purchased VR gaming company Oculus back in 2014. Sales are still low. Data from the International Data Corporation found that although Meta’s $299 Quest 2 was the most popular headset on the market, it sold fewer than 9mn units last year.
Project Cambria, Meta’s code name for a mixed reality headset, might find a bigger audience. Mixed reality overlays digital images on the real world — making it more practical to experience virtual reality without tripping over your shoes. But this headset, expected later this year, will also be more expensive.
Meta is caught between wanting to get affordable headsets to the market as soon as possible and spending more time and money working on the tech that will get users hooked. Reality Labs, the company’s metaverse division, accounts for just 2.5 per cent of total revenue but lost $3bn in the space of three months this year.
To keep the pace of investment going, Zuckerberg needs to find a better way to explain his dream. Truly immersive virtual reality is an expensive, speculative project that may not pay off for years to come. Then again, that’s exactly what Silicon Valley was made for.