May 26, 2024

Mark Zuckerberg’s gleeful rebrand of Facebook as Meta in 2021 has become a well documented blunder. What was promised — a virtual reality where we hold company meetings or visit far-away family members — has yet to be delivered, and many media outlets have proclaimed Meta’s capital-M Metaverse dead.

The company’s Reality Labs division, its virtual reality business and research division, on Wednesday posted a loss of $3.8 billion during the three months ended March 31.

But it’s not over for the Metaverse. Reality Labs’ losses, while large, have shrunk considerably from last quarter (17%) and slightly from the prior year (3.7%) — even as it continues to be a big headache for Zuckerberg.

“It’s been a good start to the year,” Zuckerberg in the company’s quarterly earnings release Wednesday. “We continue making steady progress building the metaverse as well.”

What was really happening during the so-called death of the Metaverse was that the “hype phase” of the technology was ending. Most new technologies from the internet to electric vehicles go through a hype cycle: Their proponents make bold promises about what the tech can and will do, but those promises take a lot longer to be fulfilled than expected. Zuckerberg certainly did that.

“In this future, you will be able to teleport instantly as a hologram to be at the office without a commute, at a concert with friends, or in your parents’ living room to catch up. This will open up more opportunity no matter where you live. You’ll be able to spend more time on what matters to you, cut down time in traffic, and reduce your carbon footprint.” — Zuckerberg’s claims about a future in the Metaverse

Zuckerberg didn’t promise to deliver this Metaverse overnight. He said he hoped that kind of Metaverse would come to fruition “within the next decade.” Sure, the company has shifted from “Metaverse-first” to AI-first, but its Metaverse efforts are still quietly moving forward.

In the last three months of 2023, Meta’s Reality Labs division recorded a record $1 billion in revenue. “We’ve made a lot of progress on our vision for advancing AI and the metaverse,” Mark Zuckerberg told investors on a call in February. At the same time, Reality Labs drew criticism for its far-from-profitable operation, recording much more in losses than sales: $4.65 billion.

In the first quarter of 2023, Reality Labs reported sales of $440 million, less than half its revenues in the prior quarter but 30% higher than sales during the same period last year.

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