Meta Platforms (NASDAQ: FB) announced that it would be changing its Nasdaq ticker from FB to META on June 9, finally completing its rebrand and reflecting its dedication to being a metaverse pioneer.
With the billions that the company is investing into developing virtual reality hardware and software, the extensive marketing push to cast the metaverse as the next phase of the internet, and increasing forays into burgeoning technologies (such as NFTs), how is Meta's metaverse shaping up?
Meta's investment into virtual reality cannot be understated; to the company's credit, it doesn't appear to be sparing resources in designing the foundation for its metaverse and developing the hardware that consumers will need to access it. In the long run, developing the baseline technology for an entirely new internet medium isn't something that any company could reasonably skimp on and expect positive results.
Meta's virtual reality division lost $3.3 billion in Q4, nearly $1 billion more than its losses in 2020. While those costs shrunk slightly in Q1 2022, it wasn't by much, and CEO Mark Zuckerberg directly warned investors that it might be until the 2030s before they begin to see returns on their investments.
The mounting costs are becoming steep enough to cause investors to sweat, as evidenced by the company's massive stock losses throughout the year. To make matters even worse for investors, privacy changes by rival tech firms Alphabet (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL) undermined the company's essential advertising revenues, amplifying the losses posed by VR investment.
However, that isn't to say that there isn't potential to be found.
For starters, meta's leadership is finally starting to realize that it can't finance VR development with ambition and investor patience alone. While the company is trying to refine its advertising business, it is also seeking to monetize further its metaversal ambitions with features such as a digital currency akin to Roblox's (NYSE: RBLX) Robux.
For one, Meta has significantly reduced the price of VR headsets with its $300 Quest 2, which places it well within reach of most consumers. When I purchased my Oculus Rift years ago, it was well over $500 for a used unit deeply discounted as a "warehouse deal" on Amazon, with new units retailing for $900 and above. Additionally, the Meta Quest 2 is much more accessible, using cameras mounted in the headset to track user movements instead of the Rift S, which requires external sensors.
There are certainly some setbacks for Meta's flagship headset, such as the limited library of games that can be played wirelessly due to limitations with the Quest 2's hardware or the abysmally short battery life. As an innovator of metaverse hardware, however, Meta has proven that it has the knowledge and resources to pioneer what could become the baseline for consumer VR.
The metaverse as a concept is already beginning to draw the ire of consumers, however, with concerns abound from the greater intrusion of personal privacy to the social and artistic implications of metaverse ambitions. NFTs, widely associated with the metaverse's earning potential, have become a punchline as the market for non-fungible assets crashes due to rampant fraud and theft, calling into doubt many of the proposed means of "owning land" in and profiting from content creation in the metaverse.
Meta also isn't doing any favors in terms of endearing itself with consumers as a brand, which could limit the popularity of its hardware among target demographics. After announcing that it would open a marketplace on its Horizon Worlds VR platform, Meta announced a nearly 50% commission on any sales made, which brought the company intense scrutiny for its hypocrisy after decrying Apple's 30% app store commission.
Meta's investments in technology have a strong potential for a decent payoff, given the company's advances despite the high development costs. However, the company's deeply tarnished reputation and the distrust it has created between itself and consumers aren't going to disappear due to making VR more accessible and affordable. Without addressing concerns held by many consumers, the strong headwinds Meta faces in garnering more enthusiasm for the metaverse could dampen the long-term payoffs of its extensive investments.